28/10/2026
Barclays strategists expect volatility across G10 currencies to rise and stay elevated amid a stronger U.S. dollar and heightened interest-rate swings.
While Barclays forecasts that realized volatility will narrow, it has yet to catch up with the elevated levels priced into currency options.
“Even if the dollar rally pauses, with investors already long dollars in anticipation of further gains, we see only a near-term reduction in the odds of higher FX volatility,” Barclays strategists Marek Raczko and Leonardo Crimella wrote in a note published Tuesday.
Rising currency volatility creates an unfavourable backdrop for carry trades, which seek to profit from interest-rate differentials. After delivering strong returns following Washington’s announcement of sweeping tariffs in April 2025, carry strategies have since faltered. Since late August, the yield pickup on most carry currencies has deteriorated relative to volatility, the strategists said.
Barclays expects the elevated volatility trend to persist and warns investors against betting on a rebound in carry currencies following sharp selloffs. “We do not see value in chasing global carry trades,” the strategists cautioned, adding that emerging-market currencies face the risk of repricing.
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