FXStreet (Delhi) – Research Team at Societe Generale, suggests that the Central banks’ transatlantic divergence will widen and gradually drive the euro towards parity with the US dollar. Key Quotes “In our view, FX volatility will stay contained by rising US inflation expectations. The EUR/USD options market is along the same line as risk reversals remain very soft on a historical basis despite widespread euro bearishness. It underlines that euro downside should be progressive and that risk aversion is not going to accompany the dollar appreciation. As the skew remains negative (the 6M risk reversal is trading at -1.4), the option market nonetheless discounts a slight volatility increase with the weakening of the euro.” “EUR/USD 6M realised volatility is currently just below 12 but has only rarely and briefly spiked above this level. This makes it attractive to reduce the cost of a vanilla put by setting a downside volatility condition. Namely, we recommend Buying a EUR/USD 6M put strike 1.07, conditional on realised volatility below 12.” For more information, read our latest forex news.