Posted by on September 20, 2017 3:49 pm
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Categories: Business Committees economics Economy Economy of the United States Federal Open Market Committee Federal Reserve System Janet Yellen United States US Federal Reserve Volatility

While equity implied vols are compressed to record lows – what could possibly go wrong with unwinding a $4 trillion balance sheet? – it appears FX traders are a little less sanguine about the market’s reaction to today’s FOMC decision.

And more specifically, one-day volatility in euro-dollar options surged to the highest level for the day of a Federal Reverse monetary-policy decision this year, suggesting elevated expectations among investors.

As Bloomberg notes, the raised level of the gauge suggests traders see a good chance of the euro breaking out of its recent range should Chair Janet Yellen surprise the markets on the outlook for Fed policy.

The probability of another U.S. interest-rate increase by year-end is over 50 percent, according to the overnight indexed swap curve.

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