Commerzbank analyst Thu Lan Nguyen warns that an unusually low FX volatility regime, combined with markets pricing in aggressive future rate hikes, increases the risk of sharp FX repricing if central bank tightening proves weaker than expected. Nguyen says current low FX vol partly reflects clearer assessments of the Iran conflict’s economic impact, but also indicates markets have priced in few policy surprises, leaving currencies vulnerable to abrupt moves if economic or policy paths diverge fr

Commerzbank analyst Thu Lan Nguyen warns that an unusually low FX volatility regime, combined with markets pricing in aggressive future rate hikes, increases the risk of sharp FX repricing if central bank tightening proves weaker than expected. Nguyen says current low FX vol partly reflects clearer assessments of the Iran conflict’s economic impact, but also indicates markets have priced in few policy surprises, leaving currencies vulnerable to abrupt moves if economic or policy paths diverge from consensus.