• Implied volatility is a key parameter of an FX option price - reflecting FX realised volatility and expectations

• Implied volatility trades long term lows across the board in G10 FX- but GBP/USD stands out

• GBP/USD 3-month expiry at lows since 2020 and 1-month nears lows since 2014 at 5.0 from December

• This stands out because they are near/below historical volatility - past realised volatility over the same time frame

• Historical volatility is often used as a fair value measure and GBP/USD implied vol consequently offers value

• Related comment - Cheap FX hedges, costly assumptions
GBP/USD FXO implied volatility


(Richard Pace is a Reuters market analyst. The views expressed are his own)