The end of the US government shutdown brings little immediate relief to FX markets, as key October data releases like payrolls and CPI are unlikely to appear soon. Market volatility remains subdued, but options positioning and rising Treasury bullish bets suggest traders are bracing for a data-driven shake-up ahead, ING's FX analyst Francesco Pesole notes.

US Gov't shutdown is finally over

"The US shutdown is over, but that isn’t much of a development for the FX market per se. The White House said October payrolls and CPI data are unlikely to be released, meaning volatility will take time to pick up. Average G10 1-month implied volatility is now trading with the widest positive spread (1.1 vol) above 1-month realised volatility since early April. That is mostly driven by very low realised (1m implieds remain below mid-October levels), but it is equally a signal that markets are starting to price in some data-driven shake-up in FX in the coming weeks."

"At the same time, open interest on bullish Treasury options has increased significantly in the last few days, suggesting the prevailing call is soft US data prompting dovish Fed repricing. That is also our view, and with a December cut only 15bp priced in, we think the room for front-end rates spillover into the dollar is significant."