Dec 10 (Reuters) - Overnight FX options now include Wednesday's U.S. CPI data and their price increase can therefore offer clues about the anticipated FX reaction to this final piece of key U.S data before next week's U.S. policy decision.

Implied volatility, a critical component of FX option premiums, serves as a proxy for the market's perceived risk of realised volatility. Disparities between implied and actual volatility can be traded, positioning implied volatility as a key gauge of expected market turbulence.

Overnight expiry option implied volatility is around 2.0 to 3.0 higher in the main USD/G10 currency pairs, which is a similar increase to the November data. While not excessive, it shows the market isn't complacent about the risks of increased FX volatility.

Those options expiring through December 19 cover a wealth of central bank meetings and associated volatility risk which is underpinning 1-2-week expiry implied volatility. However, 1-3-month expiry implied volatility has seen a significant decline since early last week. That is consistent with a lack of FX realised volatility and the FX market reducing positions for the Christmas holiday lull, while not expecting any serious range breaking shocks from the impending central bank meetings.

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(Richard Pace is a Reuters market analyst. The views expressed are his own)

((Richard.Pace@thomsonreuters.com))