FX Volatility

Fed cutting cycle and BoJ normalization create two-way vol in USD/JPY and EUR/USD. Expect VXY to rise from 7 to 9-10 range by Q2. Options markets underpricing the pivot risk.

GBP realized vol has been consistently below implied. Sell GBP/USD straddles and use premium to fund directional call spreads. GBP stability is structural given UK macro clarity.

USD/JPY vol is cheap relative to the magnitude of BoJ normalization ahead. Own JPY vol as a portfolio hedge against carry unwind scenarios. 6m 25-delta puts offer best value.

EM carry-to-vol ratios remain elevated, particularly in TRY, ZAR, and BRL. Options-based carry strategies offer better risk-adjusted returns than spot in election year.

FX-equity vol correlation has broken down. Rebuild exposure via dual digitals on EUR/CHF-EuroStoxx and GBP/USD-FTSE. Implied correlations are near decade lows.

NOK and SEK vol overpriced relative to fundamentals. Sell EUR/NOK and EUR/SEK strangles to harvest time decay. Regional growth stability supports low realized vol.

Hungary April elections already priced. Brazil October elections underpriced at this stage. US midterms not yet creating FX vol premium. Build positions in H1 for Brazil election vol.