Commerzbank and BNP Paribas are recommending bullish euro foreign exchange options trades to investors, taking the view that downward pressure on sterling and the yen will continue. Ian Stannard, foreign exchange analyst at BNP Paribas in London, said assets in Europe generally look favorable compared with other regions. "Inbalances in the U.K. economy continue to grow and there are signs that export manufacturing is starting to falter," he said, adding that Japan will be affected by the slow recovery in the global economy. The firm is taking a medium- to long-term view on the trend and suggesting three- to six-month euro calls against both currencies. For example, the firm is recommending a six-month euro call at JPY120.50, with an approximate price of 0.96%. Euro/yen was trading at JPY117 on Friday. This trade takes advantage of low implied volatility at 8.8-8.9%, which is close to implied vol lows seen in May of 8.6-8.7%, after reaching a high of 10.1% in June.
Commerzbank was recommending Friday that investors buy three-month euro calls at strikes of GBP0.64, when spot was trading at GBP0.6352. The premium for the trade was 0.96%. Nick Parsons, chief currency strategist in London, said that the bank is recommending the strategy because expectations of U.K. growth have been scaled back this year and are likely to undershoot the government's 2.5% gross domestic product forecast.