Dollar seems healthier but edgy on Fed’s decision; prefer ATM put in spreads

Coming the day after the Budget and the Greek uncertainty so high, it seems difficult to imagine that even the hawks would choose this July MPC meeting to switch their vote in favor of a hike. So we anticipate that there will be a unanimous 9-0 decision to keep policy unchanged.

Remember this will be the last meeting under the current schedule, from August the decision and the minutes and the Inflation Report will all be published on the same day. Separately, the RICS house price balance rose to 40% from 34%.

On the flip side, Fed Williams said he still sees two hikes by year end but is in 'wait-and-see' mode until he sees further evidence that inflation is moving back to 2%. Widely viewed as the moderate in the committee, his views carry more weight and are generally seen as a closer reflection of Yellen's own.

Currency Hedging Perspectives:

On short to medium term hedging grounds, we advocate bear put spreads with combined -0.45 delta and theta should be close to zero.

Buy 7D At-The-Money -0.49 delta puts, simultaneously short (-1%) Out-Of-The-Money put with positive theta values for a net debit.