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Euro traders are becoming anxious over the fate of single currency as many in the market as well as in political circle are in doubt that European Monetary Union (EMU) may not survive as a whole. Greece might have to choose the exit route as Greek government and the creditors are struggling to bridge the gap with two weeks to deadline.
Today Euro started the week in early decline, as reports of another talk failure had hit over the weekend. Traded as low as 1.118, however recovered sharply to trade as high as 1.126 against dollar.
This may not be large move, but 1 month implied volatility as measured from options market has reached 3.5 years high. It has become expensive for options traders to bet against any direction. Implied volatility is just shy of 5%. Last time traders were expecting such massive move was during 2011/12 Euro zone debt crisis.
As pointed, realized volatility is much lower compared to implied one. During 2011/12 crisis EUR/USD was moving about 400 pips daily compared to 150-170 points as of now.
This week is even more vital for Euro.
- FOMC rate decision is scheduled on Wednesday, 17th June, followed by Euro zone finance ministers meeting on Thursday, 18th June.
