The U.S. dollar has barely moved against the euro over the last week, leading at least one currency analyst to speculate major market players have been actively trading to keep spot away from a large option trigger level. Since Wednesday, the dollar has closed between USD1.3030 and USD1.3045. Andrew Chaveriat, an fx analyst at BNP Paribas in New York, said there is either a big option out there with a strike around USD1.3050, or a barrier option on which the barriers have not yet been hit.
Implied volatility reached its lowest point since October on Wednesday, coming in to 8.8% from 9.35% the week before. At the beginning of January, implied vol stood at 10.4%. Since the big sell off of volatility in the first week of January, the market has lost its energy, Chaveriat said. "The market is assessing what the next move will be," he added, explaining a series of data announcements could shake things up.
The currency markets hardly reacted to the Federal Reserve Bank's 25 basis point interest rate hike to 2.5% Wednesday because most market participants had predicted the rise, Chaveriat explained. George W. Bush's State of the Union address was considered a non-event by market players because Bush did not outline an aggressive foreign policy, noted Chaveriat. The release of employment numbers on Friday and the weekend's meeting of G-7 nations in London, however, could reignite the market. "Maybe [the euro/dollar inaction] is about ready to roll off," Chaveriat said.
