EUR/USD vols extend gains with spot hovering over the 1.3300 handle at the start of the European session. The 1-wk indicates 8.60/9.50, 1-mth is at 7.60/7.85 and the 3-mth shows 7.75/7.95. The 6-mth sits at 7.8/8.1 and the 1-yr is at 7.90/8.10. Vols have not been able to extend Friday's gains, with prices settling down after the frenetic movement seen in the wake of more weak US data.
Good two-way interest has been seen in the back end, which is normally associated with exotic hedging. Spot gains have fueled exotic hedging, leading to vega supply and some light interest filtering through to other contracts in the curve. The shorter maturities are expected to focus on a stream of US data this week. Productivity, factory orders and ISM non-manufacturing are due on Tuesday and US NFP data is due on Friday.
US data releases have gained in prominence, with the market looking for reasons to sell the dollar now. Spot consolidation in the 1.32's may encourage light vol selling but we expect any pullback to be shallow.
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