Despite the EM selloff, liquidity concerns
Despite the perception of volatile FX markets in recent days due to the Emerging Market selloff, a closer look at G10 volatility suggests that this is hardly the case. EURUSD implied volatility has collapsed since the beginning of the year, while options
markets in even the high-beta names such as AUDUSD hare also pricing in far less pressure compared to a similar episode in Q2 last year. This suggests some structural factors are at play, in particular the distinct lack of stress in dollar funding.
Read the full report: UBS