Morgan Stanley analysts say low volatility in G10 foreign-exchange markets is likely to continue through late August and into early September. Data from now through the September Fed meeting should be consistent with expectations that the Fed will hold rates for the rest of the year, prompting markets to gradually price out further tightening. Given a weak long-term link between Fed policy pricing and FX volatility, the bank expects FX vol to come under downward pressure. With Middle East risks

Morgan Stanley analysts say low volatility in G10 foreign-exchange markets is likely to continue through late August and into early September. Data from now through the September Fed meeting should be consistent with expectations that the Fed will hold rates for the rest of the year, prompting markets to gradually price out further tightening. Given a weak long-term link between Fed policy pricing and FX volatility, the bank expects FX vol to come under downward pressure. With Middle East risks largely priced in ahead of the US midterms and August historically a quieter month, market calm may persist.