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Are FX options underpricing UK CPI risk to BoE and GBP

BUZZ-COMMENT-Are FX options underpricing UK CPI risk to BoE and GBP May 21 (Reuters) - Overnight FX option expiry now includes Wednesday's eagerly awaited swathe of UK inflation data, but additional FX volatility risk premium appears tame despite its potential impact on the June 20 Bank of England rate decision. In recent sessions, FX option traders have been buying options that include the data and would benefit from increased FX volatility, so there is clearly deemed to be an increased realise
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Sterling set to break 7-day winning streak versus euro before data

Sterling set to break 7-day winning streak versus euro before data By Stefano Rebaudo May 21 (Reuters) - The pound was within striking distance of its 2-month high versus the dollar on Tuesday but was set to break a seven-day winning streak against the euro ahead of key economic data. Closely-watched consumer price inflation data is due on Wednesday and "flash" PMI data on British business activity will follow the next day.
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FX options wrap - Price action forecasts the FX outlook

BUZZ-FX options wrap - Price action forecasts the FX outlook FX options are forward looking and thrive on FX volatility and rapid directional moves, so their current price action is very telling about the near term FX outlook. Implied volatility gauges FX realised volatility/expectations and is a key determinant of an FX option premium, it's under pressure across the board.
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Sterling steady ahead of expected drop in inflation

Sterling steady ahead of expected drop in inflation By Harry Robertson LONDON, May 20 (Reuters) - The pound held steady on Monday as markets waited for April inflation data later in the week which is expected to show the rate of UK price rises falling back to the Bank of England's target. Sterling GBP=D3 was unchanged from Friday's closing price at $1.2704. The pound has risen around 2% so far this month as the U.S.
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FX options wrap - Key dates stand out as FX risk premiums drop

BUZZ-FX options wrap - Key dates stand out as FX risk premiums drop FX option implied volatility has extended its post U.S. CPI declines toward longer term lows from March, with little interest to buy options other than those after key data and subsequent central bank policy announcements. The sharp decline in FX option implied volatility is consistent with lower realised volatility within familiar ranges and improved risk sentiment.
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