Implied EUR/NOK volatility bounced higher last week along with the spot on the back of a decline in the oil price. We see more upside potential in EUR/NOK volatility in the coming month, not least because of the weakening liquidity situation ahead of year end.
The front-end of the EUR/SEK volatility curve (0- 1M) declined substantially post the Swedish CPI print last week, as we argued could happen in Scandi FX Volatility Monitor 6 EUR/SEK volatility higher amid Swedish CPI and election risk , 12 November.
The event risk priced on the December Riksbank meeting has risen, mainly as due to a fall in implied volatility. We judge that the event risk is fairly priced.
From a risk/reward perspective, we still see value in buying EUR/SEK call spreads with maturity around year end, as upside risks remain intact in the short term. See Reading the Markets Sweden 16 November, for more details.
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