Implied volatility is little changed from last week in the Scandi FX sphere. Realised volatility has declined substantially in both NOK and SEK,-crosses which should curb upside potential in implied volatilities in the near term in the absence of accelerating risk-off jitters.
From a risk/reward point of view, we still see value in selling 3M (NYSE:MMM) EUR/SEK straddle with the strike skewed on the upside relative to the FX forward. However, we note that political uncertainty in Sweden remains a risk factor for the SEK.
In terms of the NOK, we still like to pursue our bearish EUR/NOK view by adding short positions via 3-6M risk reversals on rallies in the cross.