Low SX5E Implied Vol, Sterling Vulnerability Drives Hybrid Opportunities

An unexpected move by the U.S. Federal Reserve to raise interest rates later this month could drive a reallocation to equities in quantitative easing regions, proving positive for the SX5E and the euro. This eventuality in a backdrop of low EUROSTOXX 50 (SX5E) implied vol and negative correlation between SX5E and EUR/GBP, along with increased concerns surrounding sterling over the short term, is driving increased interest in equity-FX hybrid structures to play the theme.