Event risk priced in EUR/SEK on this week's Riksbank meeting has increased substantially, as weak Swedish data has increased uncertainty about whether the Riksbank will hike this week or in February.
O/N implied EUR/SEK forward volatility trades around 18.6%, corresponding to a breakeven of 798 pips in the O/N straddle.
We expect the Riksbank to hike this week, which would send EUR/SEK lower, given what is priced in the market (70% probability of a hike). However, we judge that event risk is fairly priced and we favour staying on the sidelines ahead of the meeting.
Due to Christmas and New Year, the next Scandi FX volatility monitor is scheduled for 7 January.
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