Options market still siding with more yen and franc strength down the road
3-month risk reversals show that the yen and franc are the two currencies poised to gain against the dollar
Among the major currencies, the yen and franc are seen as the only gainers against the dollar amid the backdrop of ongoing US-China trade tensions and a slowing global economy.
Meanwhile, the pound is seen as the currency to lose the most as Brexit uncertainty continues to reign over the currency with the prospect of a no-deal Brexit still looming large.
Risk reversals going out to six-months and twelve-months also point to a similar picture as the one above and if anything else, it goes to show what the market focus currently is and how traders are viewing the risk outlook.
It's all about the global economic slowdown and falling bond yields amid central banks fighting to ease monetary policy. Fear is still the key driver influencing the trading outlook.