• Low EUR/USD realised volatility above 1.1600 had kept FX option implied volatility near 2026 lows over recent weeks

• Risk reversal contracts and trade flows recognised downside risks to spot, but weren't actively hedging a sudden drop

• The low risk view was reinforced by overnight option prices - they barely registered a risk premium for Friday's US jobs data

• The huge NFP beat therefore took options by surprise and implied volatility was ramped higher - 1-month from 5.0 to 5.85

• Benchmark 1-month 25 delta risk reversals have recently traded new highs for EUR puts over calls since early April at 0.6

• Outright demand for EUR puts with strikes as low as 1.1200 through 3-month expiries have been noted early Monday

• EUR/USD trades 1.1500 where large FX option expiries may contain short term. A close below 1.1513 opens scope to 1.1409

• Latest Mid-East woes add another lay of risk to EUR/USD and broader FX
EUR/USD FXO implied volatility


EUR/USD 25 delta risk reversals


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