EUR Vol: Caution into ECB – As EURUSD made new multi-year lows yesterday it quickly became the focus for the FX world again and 1mth EURUSD ended the day 0.75% higher as the FX community raced back to the table to place their bearish bets. Demand for both short and long-dated options surged but interestingly, the price of skew hasn’t rallied at all suggesting that some leverage may have been used (RKOs the most likely explanation) in addition to the vanilla spreads. With the ECB today and NFP tomorrow, future price action obviously hinges on the outcome but we would be surprised if vols ended the week without selling off from current levels. Given that the ECB is unlikely to want to rock the boat too much and that NFP has been a disappointment for several months we would rather be flat or short vega over the next few days. We would structure any bearish position via 1 by 1.5 Put Spreads, taking advantage of the skew in addition to the slightly expensive vols.