SONIA: Call spread vs put spread

Overnight NOKSEK vols have topped 10 points as tomorrow’s Riksbank and Norges Bank decisions come into view, the highest level since August and above the 7.2 YTD average. Although the rate decisions (25bp Riksbank cut and Norges Bank hold) are widely expected, focus will be on the updated rate path projections and guidance around the outlook for policy rates next year.

• That helps explain the 1-point O/N vol premium compared to the November decisions (which were also on the same day, but did not feature new projections).
• Overall, we view the risks to both decisions as slightly tilted in a hawkish direction, but the proximity of the events (Riksbank at 0830GMT and Norges at 0900GMT) still leaves scope for volatility in NOKSEK.
• An overnight ATM NOKSEK straddle requires a ~40 pip swing from current levels to break-even. On the downside, this would bring yesterday’s low at 0.9732 into view, clearance of which would strengthen a developing bearish threat in the cross. Initial resistance is the 50-day EMA at 0.9810.
• Our Riksbank preview is here and our Norges Bank preview is here

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• The slide in equity futures into the cash open has persisted, putting the e-mini S&P at new daily lows of 6118.50 and well within range of the overnight and Tuesday lows at 6113.50. This puts cash markets lower in early trade, with the S&P 500 off by 0.1% to build on yesterday's lower close.
• While the December range is largely being respected, markets will look shakier on a break of tested support at 6107.00/03.50, a print below which puts the index at the lowest this month.
• Discretionary names are leading the weakness, with a lower open for Tesla (-2.5%) undermining the sector. In contrast, NVidia and semiconductors more generally are bouncing: NVidia is higher by near 3%, although will need to add another 3.5% here to get back to flat for December.
• The Fed decision certainly the market focus ahead, at which the FOMC are expected to proceed with a further 25bps rate cut. The market is set to focus not on today's decision itself, but on the messaging and communication for the path of policy across 2025, via the policy statement, Powell's press conference and the dot plot.