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Options on the euro and experts do not expect a surprise from the Fed today

Schedule euro / dollar at intervals of 60 minutes

The dollar rose against most of the top 10 currencies ahead of the Federal Reserve’s decision on Wednesday. The volatility of the euro reflects expectations of the announcement of a neutral decision by the US central bank. The Bloomberg US dollar index climbed 0.1%. The yield on 10-year US bonds rose two basis points to 1.64% after rising six basis points on Tuesday.

The FOMC concludes its two-day meeting on Wednesday and is expected to confirm plans to adjust bond purchases only after the US economy demonstrates “significant progress” in meeting employment and inflation targets.

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“The dollar is showing only preliminary signs of recovery from recent weak performance,” said ING analyst Francesco Pesole in a note. “The dollar’s continued bounce at this point is largely dependent on any hawkish bias in today’s Fed message,” however, we expect the term patience to continue to dominate the central bank’s policy message for now. ”

“The dollar should not come out of the Fed meeting stronger than it entered it, as the repetition of the dovish message, despite rising inflation (both observed and expected), should continue to point to a highly unfavorable real yield profile for the dollar.”


The Fed’s decision will be made at 18:00 GMT on Wednesday. Powell’s press conference kicks off half an hour later.

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The DXY dollar index rose 0.1%. The euro / dollar rate fell 0.3% to 1.2056. The expiration date of large options for the EUR / USD pair with strike prices of 1.2000 (EU2.56b), 1.2080 (EU1.1b) and 1.2100 (EU1.2b) is approaching the end: DTCC. One-day volatility in the single currency is below 10%; prices are similar to expectations last week ahead of the European Central Bank’s decision.


“We continue to expect Powell to maintain his ultra-dovish outlook and emphasize that there is still a long period ahead, during which the Fed plans to maintain a soft monetary policy, which will leave open the prospect of further weakening of the US dollar,” strategists echoed to colleagues. MUFG.


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