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


Moody's Upgrades Argentina's Credit Rating Amid Economic Reforms
Oil Prices Dip Slightly Amid Focus on Russian Sanctions and U.S. Inflation Data
Fed May Resume Rate Hikes: BofA Analysts Outline Key Scenarios
RBI Clamps Down on Rupee NDF Activity, Banks Face Steeper Losses
Goldman Predicts 50% Odds of 10% U.S. Tariff on Copper by Q1 Close
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty
Global Markets React to Strong U.S. Jobs Data and Rising Yields
Citigroup Delays Fed Rate Cut Forecast Amid Strong Jobs Data and Inflation Concerns
China’s Growth Faces Structural Challenges Amid Doubts Over Data
Energy Sector Outlook 2025: AI's Role and Market Dynamics
ECB Warns of Rising Inflation Risks Amid Iran War Energy Shock
S&P 500 Relies on Tech for Growth in Q4 2024, Says Barclays
Singapore Tightens Monetary Policy Amid Middle East War Inflation Risks
Bank of Korea Nominee Shin Hyun-song Calls for Flexible Monetary Policy Amid Iran War Risks
Bank of Korea Governor Nominee Warns of Action if Korean Won Weakens Further 



