Implied vol. in the Scandi crosses picked up last week along with a general increase in FX vol. As such, impl. vol. remains in cheap territory and we still see value in adding long NOK/SEK by buying 3M (NYSE:MMM) call spreads.
Especially for EUR/SEK we note an interesting decoupling between spot and impl. vol. -different from EUR/NOK, where impl. vol. has spiked higher along with spot ( chart ). Divergence in EUR/SEK can be explained by 1) the fact that EUR/SEK vol has been following the general (global) FX vol. pattern and 2) the increase in EUR/SEK spot has been more gradual compared to the recent spike in EUR/NOK. We reckon that it most likely would require a break above 10.60 in EUR/SEK at this stage to trigger a significant isolated increase in EUR/SEK vol.
We do not expect the Riksbank to deliver new signals this week (See RtM Sweden , 8 February ), but we reckon that soft rhetoric could send the EUR/SEK higher. This could provide an attractive opportunity to buy EUR/SEK puts or put spreads.
