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FXO Market Update - Mar 24

Summary:  Norgesbank hiked with 25bp as expected and lifted the end of 2023 projection to 2.5%. Norgesbank remains one of the most hawkish central banks in G10 and the high oil price should continue to support NOK. EURNOK vol is down 1.5 vol over the last 2 weeks and now trades at pre-invasion levels at 9.00. Scandie vols remains the best value currencies when looking at the risk premium, EURNOK 1 month trades 2.5 vol below realized vol.


Saxo Bank publishes two weekly FX Options Market Update reports covering changes and updates on the FX Options and FX Volatility market. They describe changes in FX volatility levels, risk premium and ideas how to trade based on these.

FX volatility, source Saxo Bank. Vol column: At-the-money volatility for the given maturity. 1w column: Change of the at-the-money volatility for the given maturity over the last week.
Source: Bloomberg, Blue: EURNOK spot, Black: EURNOK 1 month vol

Norgesbank hiked with 0.25% as expected and also indicated another hike in June with end of 2023 projection lifted 75bp to 2.5%, which was a bit more hawkish than expected. Norgesbank remains one of the most hawkish central banks in G10.

EURNOK spot has traded down 7% since end of February on back of higher oil and a hawkish central bank. Spot has taken out the low from 2021 and now trades at the lowest level since 2018. We remain bullish NOK and think EURNOK can continue to trade lower.

EURNOK 1 month is down from 10.60 at the start of the Russian invasion to now trade at 9.00. Scandies in general remains cheap when looking at risk premiums, EURNOK 1 month vol trades 2.5 vol below 1 month realized vol and 1.5 below the 1 week realized. Risk reversals have traded lower as spot and vol is coming lower, 1 month risk reversal trades at 1 vol for the topside. We like to buy EURNOK puts with the low and cheap vol and the positive risk reversal give extra discount on strikes on the downside. Either buy plain put or finance the put with a sold call.

Buy 1 month 9.4000 EURNOK put
Cost 620 pips

Sell 1 month 9.6500 EURNOK call
Receive 470 pips

Spot ref.: 9.4875

Source: Saxo Bank
  • The Top/Bottom charts shows the top 5 and bottom 5 values/changes for at-the-money vol, risk reversal (RR) and risk premium of the 45 currency pairs we are tracking.
  • Risk premium: Implied (Imp) minus realized volatility. A positive risk premium means implied volatility trades above realized volatility, i.e. the implied volatility can be seen as “rich”.
  • Change: The difference between current price/volatility and where it closed 1w ago.

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