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.


FxWirePro: EUR/AUD regains upwards momentum but unable to hold above 50%fib level
Major Forex Pairs Action Bias: GBPUSD and AUDUSD Turn Extremely Bearish
FxWirePro: GBP/NZD remains weak, eyes 38.2%fib support
FxWirePro: AUD/USD dips below lower range, bearish bias increases
NZDJPY Bullish Rebound: Buy Dips as EMAs Align for 97 Target
FxWirePro- Major Crypto levels and bias summary
FxWirePro: USD/ CNY hits one-month low,scope for futher downside
NZD/JPY Flatlines Near 94.60: Will Key Support Reignite the Uptrend?
FxWirePro- Major Pair levels and bias summary
FxWirePro: GBP/USD rises as soft US data pressures dollar
FxWirePro: USD/CAD slips after Fed holds rates steady
AUD/JPY Slips Below 112 as BOJ Intervention Sparks Bearish Momentum: Sell the Rallies
FxWirePro : GBP/NZD strongly bearish despite upside attempts
FxWirePro- Major Pair levels and bias summary
FxWirePro: NZD/USD firms as Kiwi gains on strong ANZ business outlook data
EURUSD Spikes to 1.14306 on Fed Pause as Traders Eye Sell-the-Rally Setup




