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2025-07-28 21:57:02
[Foreign exchange market volatility has bottomed out. Is it a good opportunity to buy the bottom or is there something else going on?] ⑴ Implied volatility in the foreign exchange options market is at its lowest level since the United States announced reciprocal tariffs. ⑵ This shows that the market expects actual volatility to remain low in the future, which is consistent with the background of light trading in the summer and easing geopolitical risks. ⑶ The elimination of risks in Japan's general election and the conclusion of multiple trade agreements are supporting market risk appetite and maintaining a low foreign exchange volatility environment. ⑷ However, the upcoming Federal Reserve policy meeting and monthly employment data this week may bring market fluctuations, so the related implied volatility has increased slightly. ⑸ For example, the 1-month implied volatility of the euro against the US dollar is close to the low of 7.0% on May 13, but it is still far higher than the historical actual volatility of 5.35%. ⑹ For traders who expect a stronger US dollar or a rebound in foreign exchange volatility, the current level of implied volatility provides an opportunity to operate at a relatively low premium cost, because once volatility rises, these premium costs will also increase accordingly. ⑺ The market is facing a key psychological game: should it believe in the current period of calm, or bet on the potential impact of future data?
