Geopolitical Shocks That Could Reshape Financial Markets in 2025 
South Korea Central Bank Signals Cautious Policy Amid Inflation and Middle East Tensions 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
Eurozone Recession Risks Rise as Middle East Conflict Threatens Growth, ECB Official Warns 
Moldova Criticizes Russia Amid Transdniestria Energy Crisis 
Global Markets React to Strong U.S. Jobs Data and Rising Yields 
China’s Growth Faces Structural Challenges Amid Doubts Over Data 
Japan Inflation Expectations Rise as BOJ Rate Hike Timing Faces Uncertainty 
RBA Raises Interest Rates to 4.35% Amid Rising Inflation Risks and Middle East Tensions 
Goldman Predicts 50% Odds of 10% U.S. Tariff on Copper by Q1 Close 
Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes 
OECD Sees Bank of Japan Raising Interest Rates to 2% by 2027 
US Gas Market Poised for Supercycle: Bernstein Analysts 
U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures 
Moody's Upgrades Argentina's Credit Rating Amid Economic Reforms 
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
