FX Weekly: Half-Time Predictions Or Why It May Be Time To Get Real

The report highlights a shifting focus from nominal to real interest rate spreads as the primary G10 FX driver in H2 2026. Key risks include the US-Iran geopolitical standoff and impending UK political leadership changes affecting GBP volatility.

Key Takeaways

• 1.The US-Iran standoff remains a primary driver for G10 FX, though a 'frozen conflict' ceasefire scenario is anticipated by September.
• 2.FX investors are expected to shift focus from nominal rate spreads (central bank policy) to real rate spreads (relative growth) in H2 2026.
• 3.UK political risks are intensifying ahead of a June by-election, with a potential Andrew Burnham leadership win seen as a major downside risk for GBP.

Table of Contents

• Latest Publications
• FX and gold outlook
• G10 FX Portfolio
• FX Focus
• GBP: crucial few months ahead
• UK political risks and the FX vol market
• GBP vols – rich vs cheap analysis
• Flatter vol curves not flattering the GBP
• Trading the UK political risks
• Week ahead: key themes & trades
• FX Positioning Update
• FAST FX Fair Value Model Update
• FX Fair Value Model Update
• FX Risk Index
• Key releases in the week ahead
• Exchange rate forecasts
• Economic forecasts
• Interest rate forecasts – developed countries

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