Will EUR/USD Volatility Snap Back?

CME Group
Economic Research

Will EUR/USD Volatility Snap Back?

By Erik Norland, Senior Economist, CME Group

EURUSD Volatility Has Declined Sharply
  • 30-day EUR/USD options implied volatility in 2021 is down sharply to 5%-6%.
  • Implied volatility ranged from 5%-10% past few years, and 10%-15% before 2016.
  • U.S. and eurozone budget deficits, inflation rates have diverged since pandemic.
  • Widely traded EUR/USD has been hovering in a narrow range past six years.
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Will EUR/USD Break Out of Narrow Trading Range?
  • EUR/USD has traded in a narrow 1.04-1.25 range the last six years.
  • U.S., European economies diverged after moderate growth from 2015-2020.
  • U.S. budget deficit has widened to 20% of GDP, double that of Europe.
  • Core inflation has soared in U.S., while easing in eurozone to 0.7%.
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