FX options wrap - USD dominates in post cen-bank landscape

A bonanza of central bank meetings has now passed, with a hawkish tilt from the Fed leaving the wider USD on the front foot.

However, there wasn't a huge drop in implied volatility, with the likes of 1-month expiry EUR/USD already low and seemingly fair value on a realised basis. EUR/USD spot losses remain a grind but that's due in part to the presence of RKO and binary barrier options, which can still be worth owning.

GBP extended losses after the UK left rates on hold and there was a mild easing of implied volatility, with 1-week 8.5-7.5 and 1-month 7.5-7.35, One-month expiry is eyeing long term lows from June at 6.9, which may help to limit further losses, especially if spot remains weak - the most vulnerable side of this market.

AUD/USD implied volatility is currently supported above recent and longer term lows by the FX setback from above 0.6500 to below 0.6400. Benchmark 1-month implied volatility is 9.5 from 9.25 (8.9 is the June low)

Low short dated expiry USD/JPY implied volatility and downside strike option risk premiums would suggest the central bank is less likely than in previous months to surprise markets on Friday.