There is scope for more concession for political risk in European currencies. EUR still screens near fair value on this framework, indicating that there is room for further weakening if political risks intensify heading into the French elections. The richness in EUR continues to be similar to that in CHF on this framework, a gap we think should widen in favor of Swiss franc.

The dollar has strengthened across the board over the past month, keeping it as the richest currency on this framework. The outperformance of the dollar has come primarily at the expense of commodity currencies, but the overall ranking of these currencies hasn’t changed much in response. NZD and AUD continue to screen the richest on this framework, while the petrol currencies (NOK and CAD) are closer to fair value (refer above chart).

Scandis continue to offer value relative to most of the G10. SEK is still the second cheapest currency on this framework despite the outperformance over the month. NOK is modestly above fair value but still the third cheapest cross-sectionally and the cheapest within the G10 commodity currencies spectrum. NOK has richened modestly relative to CAD and are currently mispriced by a similar magnitude, which continues to indicate that there is a little NAFTA-related political concession in CAD (refer above chart).

Trades:

Long a 3-mo EURNOK 9.07 - 9.75 range binary, Short a 2-month 9.10 EUR put/SEK call, while short NZDSEK via vanilla puts.