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EURUSD Outlook: Volatility Tame Ahead of ECB Minutes, No Sign of Range Break

EURUSD Outlook: Volatility Tame Ahead of ECB Minutes, No Sign of Range Break

What's on this page

EURUSD Talking Points

  • ECB Meeting Recap
  • Don’t bet on EURUSD Volatility According to Option Markets

ECB Meeting Recap

At the March meeting, the ECB had surprised many by announcing fresh stimulus in the form of TLTRO 3 earlier than expected. The central bank noted that the monetary tool will start from September 2019 and end in March 2021. Alongside this, the ECB altered their rate guidance to “the Governing Council now expects the key ECB interest rates to remain at their present levels at least through the end of 2019”, from the “end of summer 2019”. This however, had not been a huge surprise given that money markets had not anticipated an ECB rate hike until at least H2 2020.

Don’t bet on EURUSD Volatility According to Option Markets

The Euro had been largely unfazed by the weak German factory orders released earlier today with EURUSD falling a meagre 15pips initially. EURUSD implied volatility suggest that investors should not expect much in the way of volatility in the wake of the ECB meeting minutes with O/n vols dipping 0.36 vol to 7.04, which implies a move 34pip move. Alongside this, EURUSD risk reversals have edged closer to neutral suggesting that there is little sign of a range break in the near term. However, a more dovish than expected tone in the ECB minutes could see investors seek protection for Euro losses (greater demand for EUR puts, which lowers EURUSD risk reversals).

Source: Thomson Reuters, DailyFX

EURUSD Risk Reversals

Source: Thomson Reuters

Given the recent rhetoric from ECB rate setters stating that the announcement of further details regarding TLTROs could be provided at a later date (possibly June meeting), which in turn can explain the lack of volatility priced in for today’s event.

EURUSD PRICE CHART: Daily Time Frame (Dec 2018 – Apr 2019)

Notable option expiries

1.12 ($503mln), 1.1230-40 ($662mln), 1.1250-60 ($1.5bln), 1,1275-80 ($1.1bln)

For a more in-depth analysis on EUR, check out the Q2 Forecast for EUR

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at

Follow Justin on Twitter @JMcQueenFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.