Norges Bank to turn more neutral as well: given the 60% chance of a rate hike in June, as penciled in by the Norges Bank, a more dovish stance at the next May 9 meeting would likely drag NOK swaptions values lower, weighing on USDNOK vol as well.
In the following, we will consider two possible implementations of the RV signal discussed above, one as a pure vol RV trade and one as a directional construct.
The vol spread touched a multi-year low in April as CAD vols sank to lowest since 2014 at a more rapid pace than NOK vols. The spread started to rebound but based on the swaptions – FX vol framework still leaves 3pts of misalignment between the two.
While realized vol spread has started to perform, we prefer to focus on the lingering longer-term risks that have been largely ignored by the markets and should play right into our hands.
Historical P/L time series shows the tight correlation between the vol spread and its returns that translates each vol pt of change in vol spread into 1 vol pt of returns.
Hence, we recommend buying 1Y USDCAD straddle @6.0/6.2 vs sell USDNOK straddle @8.45/8.9. Courtesy: JPM
Currency Strength Index: FxWirePro's hourly CAD spot index is inching towards -30 levels (which is mildly bearish), while hourly USD spot index was at -26 (mildly bearish) while articulating (at 09:40 GMT).
For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex


Japan PM Sanae Takaichi Unveils Growth Plan as BOJ Independence Concerns Lift Bond Yields
Brazil Cuts Selic Rate to 14% as Inflation Eases but Risks Persist
U.S. Stocks vs. Bonds: Are Diverging Valuations Signaling a Shift?
UBS Predicts Potential Fed Rate Cut Amid Strong US Economic Data
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed
Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes
BOJ Minutes Signal More Rate Hikes as Inflation Risks Grow
Japan Economy Minister Downplays Inflation Risks Despite BOJ Warning
Global Markets React to Strong U.S. Jobs Data and Rising Yields
Chile Central Bank Holds Interest Rate at 4.5% as Inflation and Global Risks Persist
2025 Market Outlook: Key January Events to Watch
South Korea Raises Interest Rates to 2.75% as Inflation and Weak Won Drive Tightening
U.S. Banks Report Strong Q4 Profits Amid Investment Banking Surge
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 



