With the equity markets around the world recovering to new highs or close to new highs, seeing equity volatility back near the lows of the year is no major surprise. But the low implied volatility readings in the currency and commodity markets are surprising given the major moves those markets have experienced in the past month
Here is this week’s Vol Around the World snapshot, courtesy of Bloomberg:
Oil, gold, copper, EURUSD, and AUDUSD all traded at multi-month lows in the past week. Despite that weak price action, there was little panic in the vol market, as all of those markets still have implied volatility levels at the low end of the 1 year range. Moreover, gold and copper are close to multiyear support, where you would normally expect option buying to become more feverish in both directions (call buyers playing for a bounce off support vs. put buyers playing for a break of support).
Clearly, those markets (with the exception of Japanese equities and the yen) anticipate orderly price action, lower or higher, as long as global financial markets as a whole are calm. Vol sellers continue to have the upper hand for now.