Euro Pressured as Volatility Rises on Jackson Hole, FOMC Meeting

• Euro Pressured as Volatility Rises on Jackson Hole, FOMC Meeting

The euro started the week on a defensive footing amid thin flows as the market’s focus remained fixed on the central bankers’ summit at Jackson Hole, Wyoming later this week, which has kept intact demand for long-volatility trades.

Even as odds have diminished that the Federal Reserve’s annual symposium could be a game changer for markets, the euro’s one-week implied volatility rose the most since July 13 as long-vega trades gained traction. U.S.-South Korea joint military drills starting Monday, which raises the risk of a rebound of North Korea-related tensions, also supported the case for such positioning. The relative premium to own exposure in euro-dollar options over Jackson Hole rose to a three-week high.

One-month volatility in dollar crosses also jumped as the tenor captured the aftermath of the Fed’s Sept. 20 meeting. The Bloomberg Dollar Spot Index was slightly higher as of 10:18 a.m. London with flows closer to the lower part of this month’s range, according to Europe-based traders. The euro was sold by intraday accounts, they added, as interbank and leveraged names were seen willing to fade moves 0.5 percent away from current spot price.