Dollar Climbs Before PCE Data Amid Bearish Options
The dollar traded mixed versus its Group-of-10 peers, while the pound underperformed, as traders watch for month-end flows. Personal Consumption Expenditure data, the Federal Reserve’s preferred gauge of inflation, is due later.
The Bloomberg Dollar Index rises 0.1% and the yield on benchmark 10-year Treasuries is up 2bps to 4.22%.
PCE data is expected to accelerate to 2.9% y/y from 2.8% in June, according to a Bloomberg survey.
The dollar’s volatility skew shifts lower and is now bearish across tenors; modest interest for fresh downside exposure into the US payrolls, Europe-based traders say.
GBP/USD drops as much as 0.3% to 1.3470, leads G-10 losses; British companies are upping their protection against foreign-exchange swings.
EUR/USD little changed at 1.1679, heading for a 0.3% drop this week; inflation in three of Europe’s top economies was a touch less than expected this month.
One-week volatility rises as much as 152bps to 8.24%, highest since Aug. 8, as it now captures next week’s release of US labor data; still, implied vol trails realized by 64bps, leaving options underpriced throughout this week.
USD/JPY pares a 0.2% advance to trade slightly higher at 146.99; inflation in Tokyo sharply eased, led by government utility subsidies, though it stayed well above the Bank of Japan’s target.
Source : Bloomberg
