Morning Update: FX Options, BoJ, Colombian Election, US ISM, and Oil

Goldman Sachs reviews five macro themes, highlighting multi-year lows in FX volatility, the upcoming BoJ rate decision, Colombian election shifts, a US manufacturing beat, and oil price downside risks.

Key Takeaways

• 1.FX volatility levels are currently at multi-year lows, prompting a preference for long gamma positions in NZDUSD and USDZAR.
• 2.The market is pricing a 76% chance of a Bank of Japan (BoJ) rate hike in June, but GS Research forecasts July as the more likely timing.
• 3.Colombian presidential elections saw right-leaning De la Espriella take the lead; the COP remains attractive for carry (10%) despite fair valuation.

Table of Contents

• 1) FX OPTIONS TRADING (PRANEET) - 5 Themes in FX Options
• 2) Ueda Speech
• 3) FX STRATEGY (ALVES) - COP After the First Round
• 4) US ECON (MERICLE) - ISM Manufacturing Index Above Expectations
• 5) COMMODITIES RESEARCH (STRUYVEN) – Weak Demand Implies Price Risks Remain Two-Sided

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