FX Daily Low Volatility and Carry Trade Dominance

FX volatility levels near five-year lows are keeping carry trades like AUD and NOK dominant. Meanwhile, the USD finds support from hawkish Fed expectations, and Sterling faces pressure from UK political uncertainty.

Key Takeaways

• 1.FX volatility remains near 5-year lows, driving demand for high-yield carry trade currencies like AUD and NOK.
• 2.The USD is expected to remain in demand due to hawkish Fed pricing following high April CPI and the expected confirmation of Kevin Warsh as Chair.
• 3.Sterling is experiencing independent weakness due to political instability and potential leadership challenges for PM Keir Starmer.

Table of Contents

• USD: Fed pricing shifts more hawkishly
• EUR: Low vol environment
• GBP: Starmer clings on
• CEE: Newsflow from Hungary is running out of steam but the story remains bullish
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