From the FXWW Chatroom: UBS: Concerns about risk sentiment have extended, leading to buying of CHF cash, Cross-JPY vol, EM vol and low delta gold topside, as well as considerable trimming of EM cash longs in RUB & TRY. There is also increasing interest in the Italian election and German SPD vote, and buyers of EURNOK vol generally.
All amounts below are approximations based primarily on conversations with UBS voice trading.
Week beginning Feb. 5.
EUR selling, CHF the standout
Sold 2 bn EUR on the week split evenly between two themes. EURCHF selling for macro and RM names building shorts given the potential for catch up if risk off sentiment builds. Also seeing EURUSD selling and EURcross selling generally, combination of position reduction and USD strength plays for a further deterioration in risk sentiment.
Options markets are nervous and vol remains supported
Especially with market makers short Cross-JPY vol and marking curves higher. We’ve seen clients buying 1-2m EURUSD downside playing for USD strength, GBPUSD 3-6m put spreads, EM vol buying (TRY & RUB ATMs the standouts) and EURNOK vol buying. In EURNOK the directional bias is mixed but NOKSEK 1-3m topside interest persists.
Gold skew is very well bid across all tenors and we are seeing good demand in low delta calls across the curve. Since the equity correction began a week ago, 1m vol is up 2.5 vols and 1yr is up .7 vols
Italian election and SPD vote
Increasing interest in the Italian Election and German SPD vote results on March 4, 1m rr have gone from -0.30 to around -0.75 now as spot moves lower and downside risk builds. With the fwd vol slightly higher at 20.5 vol there is room for this to extend to the Dec highs of 30 vol.
Real money trim EM longs
RM bought 400 USDRUB and 300 USDTRY, trimming existing positioning given risk sentiment. Net better buyers of USDAsia overall, though flow has been broadly two way (selling in $MYR & $CNH vs buying in $KRW & $IDR). USDLatam flow has been two way also, though USDMXN selling was notable at $200 net.
All amounts below are approximations based primarily on conversations with UBS voice trading.
Week beginning Feb. 5.
EUR selling, CHF the standout
Sold 2 bn EUR on the week split evenly between two themes. EURCHF selling for macro and RM names building shorts given the potential for catch up if risk off sentiment builds. Also seeing EURUSD selling and EURcross selling generally, combination of position reduction and USD strength plays for a further deterioration in risk sentiment.
Options markets are nervous and vol remains supported
Especially with market makers short Cross-JPY vol and marking curves higher. We’ve seen clients buying 1-2m EURUSD downside playing for USD strength, GBPUSD 3-6m put spreads, EM vol buying (TRY & RUB ATMs the standouts) and EURNOK vol buying. In EURNOK the directional bias is mixed but NOKSEK 1-3m topside interest persists.
Gold skew is very well bid across all tenors and we are seeing good demand in low delta calls across the curve. Since the equity correction began a week ago, 1m vol is up 2.5 vols and 1yr is up .7 vols
Italian election and SPD vote
Increasing interest in the Italian Election and German SPD vote results on March 4, 1m rr have gone from -0.30 to around -0.75 now as spot moves lower and downside risk builds. With the fwd vol slightly higher at 20.5 vol there is room for this to extend to the Dec highs of 30 vol.
Real money trim EM longs
RM bought 400 USDRUB and 300 USDTRY, trimming existing positioning given risk sentiment. Net better buyers of USDAsia overall, though flow has been broadly two way (selling in $MYR & $CNH vs buying in $KRW & $IDR). USDLatam flow has been two way also, though USDMXN selling was notable at $200 net.
Lesson Learned: Regime shift?
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