USD-bloc vols (EUR, NOK, SEK, PLN etc) have cheapened the most recently and offer the best value as long targets.

The Polish zloty has been the worst performing currency in emerging markets over the past month. After yesterday's elections, the comments by PiS MPs urging an easier monetary policy stance, as well as the risk of a market-unfriendly implantation of an FX mortgage conversion plan have been some of the factors driving zloty underperformance.

Additionally, the vol spread also tends to spike during European QE, meaning that selling a EUR cross vol (EUR/PLN in this case) heading into potential ECB easing in December is not an unreasonable risk if it also sponsors a jump in overall vol levels.

Trade tips:

Draghi's dovish stance prompts us to increase euro shorts; initiate EUR shorts vs. CHF in G10 and vs. RUB and PLN in EM.

While, we had advocated a long USD/NOK vs. short USD/CAD 1M gamma spread last week and add to that risk bucket via USDPLN - EURPLN 3M vol spreads.

USD/PLN and EUR/PLN are on the right side of the gamma valuation divide, current entry levels are opportune and realized vols have been supportive of the spread direction for the better part of the year.

We think the zloty is already pricing in significant risk premium after the election and reiterate our short EUR/PLN recommendation.