There is a contingent of analysts that still expects the Riksbank to keep rates on hold at tomorrow’s meeting (7 out of 20 surveyed by Bloomberg). As such, overnight options in SEK crosses exhibit a notable volatility premium.
Overnight vols have exceed 12 points today (the highest since the November 2023 Riksbank meeting), pushing an overnight ATM straddle to break-even on a ~600 pip move (or 0.5%) into the Wednesday cut. A dovish decision tomorrow (e.g. a 25bp rate cut accompanied with guidance for further easing at upcoming meetings) could see EURSEK test 11.7709, the April 30 and YTD high). We would be surprised to see an overtly hawkish decision tomorrow (e.g. a hold in rates alongside no guarantee of a June cut), given the recent developments in domestic data. For more, see our preview here.