The euro is gaining ground in options markets as uncertainty around US economic policy drives demand for EUR/USD upside protection. Commerzbank analyst Michael Pfister reports that risk reversals have flipped back into positive territory following recent statements from the US Treasury Secretary, signaling renewed trader appetite for euro calls over puts.
Risk reversals measure the premium difference between call and put options, with positive readings indicating stronger demand for calls that profit from currency appreciation. The shift suggests options traders are positioning for potential euro strength against the dollar as doubts emerge about America’s policy direction. This development marks a notable reversal from earlier positioning that favored dollar strength.
The move comes as comments from Treasury leadership have introduced fresh uncertainty into currency markets, prompting derivatives traders to reassess their dollar exposure. Both spot forex traders and institutional players are watching these options flows as leading indicators of sentiment shifts.
FXnCO Insight
Options positioning suggests traders should monitor EUR/USD upside risk as policy uncertainty creates potential for dollar weakness in the near term.
Source: FXStreet