Traded volatility is falling across financial markets. Investors have settled into the view that the Fed will likely cut rates twice more this year and probably another 50bp in 2026. The US interest rate volatility – so often the driver of volatility in other asset classes – is just not here at the moment. And the delay in big US data releases, such as today's US jobs report, further postpones forming a clear view on the friction between sticky inflation and a softening labour market. Instead, the world is left to watch in wonder at the ongoing AI rally, ING's FX analyst Chris Turner notes.

Lower oil prices are a dollar negative

"Low volatility means continued interest in the FX carry trade, where the Turkish lira remains very popular. There also remains a strong interest in the Egyptian pound, which continues to rally despite another 100bp rate cut yesterday. Hungary's forint also remains a recipient of carry trade inflows."

"The DXY dollar index has ground to a halt near 98. We doubt today's release of the September ISM services data will have much impact. We also have an array of central bank speakers at Klaas Knot's farewell symposium in Amsterdam – including the Fed's John Williams. Additionally, we will hear from Fed superdove, Stephen Miran, twice today. The debate over the next Fed chair has taken a backseat for the time being, but will return. Current betting odds show the favourites as Christopher Waller (12%), Kevin Warsh (10%) and Kevin Hassett (9%)."

"There are also a couple of weekend event risks for traders to consider. The Japanese LDP leadership election result should be announced tomorrow, where Sanae Takaichi would be seen as more yen bearish than Shinjiro Koizumi. And a Bank of Japan hike is still priced at 60% for the end of the month. We think the yen is undervalued and should meet good buying on any dips. And the weekend also sees an OPEC+ meeting, with risks of a higher supply increase as the Saudis try to reclaim market share. Lower oil prices are a dollar negative."