News and markets
It’s Independence Day in the US and the markets are quiet. We’re a bit thin on news as well. The main talk has been of the banks: Bob Diamond faces a grilling by the Treasury select committee today and everyone wants to know if (or how badly) he’s going to swipe at the BoE. Jamie Dimon is facing an uncomfortable probe into the energy dept at JPM. The ECB meeting tomorrow has been discussed as well and I think traders have all come to the opinion that 25bp is a done deal.
Aussie retail sales were the only real highlight of the morning: the data was better than expected at +0.5% (last month revised up as well). The AUD went up 40 pips to 1.0320 but then gave back nearly all of the gains which is rather inauspicious. Other majors are little changed in Asia. USDAXJ NDFs have bounced a little off their NY lows. 1m KRW is up 3 to 1138, 1m INR has bounced 40 paise to 54.85 after 3 thumping down days from Friday to yesterday. The main exception here is USDCNY which saw a surprisingly lower fix early and the NDFs and CNH have both moved down 50 pips after that.
Oil too is slightly off the highs after a great 3 day performance, Brent future just holding on to the 100 level by it’s fingertips. Stock markets are nearly all in the green today with Sydney and Wellington leading the pack after the Aussie data.
In the other data, China services PMI on the HSBC version fell to 52.3
Later today we have the Riksbank and the Polish MPC (no change expected in both), PMI from several parts of Europe and Retail sales from the EZ.
Option vols
The slide on vols continues, but the move has slowed now that vols are in some cases getting rather close to recent lows.
Volumes not big today, the US holiday is dampening appetite for new deals.
In the majors, EUR, AUD and CAD vols are looking really quite close to the lows from 2 months ago, while EURCHF and the Skandies are already there. Vol curves are all upward sloping, AUDNZD and of course EURCHF are the ones which look unusually steep, the others are reasonable.
MYR, SGD and TRY vols are three that are close to the April lows. The 1m vol is down at 6.4, 5.7 and 9.25
KRW and CNY are pretty much at the year’s lows in some periods. 1m KRW is 7.2 middle today which is almost the low seen at the end of April, and 1y CNY is 2.525 middle, just a whisker above the low print of 2.45 last week. Sellers of CNY options in our customer base have not altered their behavior and are still selling 6.40 to 6.50 strikes even with the vols testing the lows.
Vol curves in emergings are of mixed steepness. KRW is by far the steepest, with SGD MYR and TRY all looking steeper than usual. Meanwhile INR and the LatAms are looking very flat compared to the rest of the world.
NATIXIS