Summary: Saxo Bank's latest report on the FX Options space is now live, with analysis of the trade war-induced spike in MXN vols and the EURUSD retracement from mid-week highs.
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EM FX Carry Trade Update September 23 2019
Conditions for carry traders have been very supportive outside of a rather firm USD of late, as risk appetite has not even been fazed by the USD liquidity issues that required the Fed to begin ad hoc liquidity operations to smooth over the situation. We're a bit more concerned about the outlook, especially given the Fed's lack of a more cautious stance at the most recent meeting, not to mention a sign or two that US-China trade deal talk may not lead anywhere next month.
FX Update: USD funding issues in focus over FOMC meeting
Over tonight’s FOMC meeting, market participants will need to focus on the FOMC’s discussion of how it views signs of a funding crisis in the US financial system and yesterday’s sudden need to do a large overnight repo for the first time in more than a decade. The Fed’s assessment of the economy and policy guidance is secondary.
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