Plunging volatility may set tone for rest of this year
Nov 8 (Reuters) - Plunging volatility in the wake of the U.S. election may set the tone for the rest of this year, with traders unwinding bets and currencies trapped in tighter ranges.
One-month EUR/USD vol, which is the benchmark, has collapsed from almost 9.0 towards 6.0, which means there is much less chance that this already quiet pair moves in any direction.
What this means is that traders who have established the biggest bearish EUR/USD bet in almost 5 years are less likely to see the profits they desire, and it was a big gamble anyway.
This year's EUR/USD range has fallen within last year's, which was the second smallest on record, and while there was some whip around the time of the U.S. election that encouraged gambling, EUR/USD never moved far from the centre of last year's range at 1.0862, and remains close to it.
There has been little EUR/USD movement for almost two years and the big events that might have led to a move have passed without creating one.
EUR/USD is the most high profile FX pair and has a lot of influence on what happens elsewhere, which suggests that an unwinding of shorts will encourage the paring of other currency positions, and the quiet state of this key market discourages all FX trading for the remainder of this year.
For more click on FXBUZ
USD index and euro and yen vols https://tmsnrt.rs/3UG6SEZ
(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
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