Insights 
VT 
Market volatility in the EUR/USD pair is currently low, with weekly movements narrowing to multi-month lows. Upcoming central bank decisions and President Trump’s visit to Asia could soon cause fluctuations in the foreign exchange markets.
Recent Tariff Developments
Recent tariff developments have not led to major shifts in the markets, indicating that previous trade war disruptions might be largely resolved. Though intraday movements have shown low standard deviation, they are not much lower than the levels seen in mid-April. Therefore, recent weeks, while calm, have not experienced unsustainable movements.
Potential news from President Trump’s Asia trip could influence market activity, along with decisions from the Bank of Canada, the Bank of Japan, the Federal Reserve, and the European Central Bank. Upcoming data releases are set to provide more inputs, albeit without US contributions due to the government shutdown. This situation might change soon, as recent reports suggest potential progress. Consequently, perceived market volatility may increase in the coming week.
The narrow movements in foreign exchange markets, particularly in EUR/USD, should be viewed with caution. Current 1-month implied volatility for the pair is sitting at just 5.2%, a level not seen since before the energy crisis of the early 2020s. This sense of calm is deceptive and suggests the market is underpricing upcoming risks.
We have seen this pattern before, particularly after the trade war turbulence of the late 2010s, when markets entered a quiet phase before central bank policy shifts caused sharp adjustments. The current environment feels very similar, as low realized volatility is causing traders to become complacent. However, this period of compression is likely unsustainable.
Looming Central Bank Decisions
Looming central bank decisions are set to stir the markets from this quiet state. While Eurozone inflation cooled to 2.8% in the latest September 2025 reading, the upcoming ECB and Federal Reserve meetings in November are clouded by uncertainty over future rate paths. Traders should therefore not mistake the current lack of movement for stability.
Given these conditions, positioning for an increase in volatility seems prudent. Buying options, such as straddles or strangles, allows for a position that profits from a significant price swing in either direction. This is a way to prepare for the inevitable break from this low-volatility range without betting on the specific catalyst or direction of the move.
