The USD/JPY pair ended the week up by 133 pips, reaching 144.85. This rise has led to doubts about how long this upward trend in US yields and USD/JPY can continue.
Concerns exist about the potential negative effects on the US economy from trade disruptions and policy uncertainties, which might impact USD/JPY. Services like eFX Plus provide trading ideas and offer subscription options: a basic plan for $79 per month and a premium plan for $109 per month, with a limited-time 7-day free trial.
Market Trends and Expectations
Last week saw a strong move in the USD/JPY pair, rising 133 pips to 144.85. However, many traders are now questioning the sustainability of this trend. The increase reflects the ongoing demand for the dollar, supported by rising US Treasury yields. Still, as these yields come under closer examination—especially with signs of economic slowdown—focus is shifting from continuation to sustainability.
The short-term market environment is changing. Expectations of slower growth in the US and uncertainty from policy decisions are likely to affect risk attitudes and currency exposure. These concerns are real; weak economic data, trade tensions, and political changes can all limit the momentum behind trades sensitive to interest rates, such as long USD/JPY positions.
Traders should have noticed how the USD/JPY pair relies heavily on interest rate differentials. While this relationship remains, its stability may decrease if new information alters predictions about future rate decisions. This is where things may become complicated.
Positioning and Strategy
For those trading derivatives in this currency pair, the initial reaction might be to stay with the trend a bit longer. However, beyond just price action, positioning and implied volatility tell a different story. It’s crucial to watch if risk reversals and option skews start indicating a greater demand for downside protection—when this begins to widen, it often signals a change in market sentiment.
Kurosawa’s earlier observations about policy uncertainty are particularly significant here. As this issue lingers, many traders are adjusting their positions, particularly on the edges of the forward curve. This suggests it’s wise to keep delta lean and gamma neutral, especially with upcoming economic reports on the horizon.
If Jackson’s yield projections are correct—meaning rate expectations stay high into the next quarter—the dollar may have another chance to rise. Conversely, any disappointing labour market or inflation data could reverse this trend quickly. These instances make skews and tails more crucial than mere chart levels.
Currently, we’re focusing on short-term options—weekly and one-month contracts—for better flexibility and lower exposure to headline risks. We have observed that demand for bullish USD/JPY strikes has leveled off, suggesting some traders are not convinced of another significant move up without a new catalyst.
To navigate what might be a more volatile period, adjusting volatility surfaces and recalibrating delta exposure may be beneficial. We prefer to remain reactive rather than predictive in the short term, closely monitoring the spread between realized and implied volatility in JPY pairs. When this spread starts to change, it often signals an already underway shift.
We are also keeping an eye on key threshold levels. If the pair stays above 145.00 leading into the next rate decision, it could prompt policy discussions that may impact the market. However, if it falls below 144.00, it could indicate a lack of confidence, potentially triggering quick exits by short-term traders.
For the time being, strategies that balance directional and volatility approaches seem most appropriate. This means favoring straddles or risk reversals over direct bets. Flexibility will be key in distinguishing between defensive and reactive trades as market conditions evolve rapidly.
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Bank of England rate-setter Megan Greene has shared her thoughts on the ongoing drop in inflation. She believes that the recent rise in inflation is due to temporary factors and expects it to return to target levels in the medium term.
Greene points out that while there’s a tendency to ignore current inflation levels, there are risks. One concern is that people might spend less, even if interest rates go down.
She also predicts that trade fragmentation will lower inflation in the UK and suggests there could be different policy directions in the future.
Currently, the market predicts that the Bank of England will reduce interest rates by 38 basis points by the end of the year.
Greene’s comments highlight that short spikes in inflation are not seen as signs of a long-term trend. Instead, central bank officials are focused on larger factors that are likely to push inflation back towards target levels over time. These “one-off” factors—like fluctuating energy prices or seasonal variations—are recognized but do not lead to aggressive policy changes. This cautious approach signals that rate-setters are avoiding overreaction to short-term changes.
This suggests a careful balancing act. If inflation is viewed as temporary, there will likely be a stable approach instead of sudden rate cuts or hikes. However, Greene raises an important issue: households may not react consistently, even when borrowing costs are lower. Factors like consumer confidence, sentiment, or job market concerns could make people hesitate to spend, even with better borrowing conditions.
Greene also points out a more significant shift. Disrupted global trade is becoming a force that keeps prices down. For traders focused on interest rate probabilities, this makes the outlook clearer: over time, lower inflation supported by trade changes may lead to modest or declining interest rates.
When Greene talks about policy divergence, she means that not all central banks will act the same way. This is crucial because it suggests that the interest rate paths of major economies may begin to vary. We shouldn’t expect the Bank of England to follow the same timing or scale as the Fed or the ECB. This gives us more flexibility, but it also adds complexity.
Currently, futures markets indicate a slight easing, with just under 40 basis points expected by year-end. This doesn’t suggest urgency; it corresponds with a central bank that is aware but not overly concerned. For us, this means we need to pay close attention to data. Labor metrics and core inflation indicators will be more important in predicting short-term price movements than geopolitical events or wage reports.
We should be alert for any changes in forward guidance from policy officials, as this could hint at future timing or sequence. For now, Greene’s position suggests we should exercise patience and closely monitor developments rather than engage in speculative optimism or panic. For those managing varying exposure across durations, a flatter interest rate curve may form if policies remain steady amid reducing inflation. Expect gradual alignment with target levels, focusing on the path rather than the speed.
**Increased Non-Farm Payrolls and Signs of Economic Confidence**
Walmart is seeing steady consumer activity, and the White House has no plans for a call between Trump and Musk. Meanwhile, Fed’s Harker mentioned that rate cuts could be on the table later this year.
In the markets, gold fell by $40 to $3,313, US 10-year yields rose by 11 basis points to 4.50%, and WTI crude oil increased by $1.28 to $64.65. The S&P 500 gained 1.1%, while the USD strengthened and the JPY weakened.
The market reacted positively to the non-farm payrolls, showing some underlying tension leading up to their release. Good news about US-China trade likely influenced this sentiment.
After the jobs report, Fed funds pricing for April 2026 dropped by 10 basis points to 70 basis points, which boosted the dollar. The USD/JPY approached peak levels for the week, while the dollar made modest gains of 25-35 pips across the board.
## Recent Employment Data in Focus
Recent employment data from the US and Canada were better than expected. The US non-farm payrolls rose by 139,000 in April, exceeding the expectation by about 9,000 jobs, lifting cautious sentiment into a more confident outlook. Similarly, Canada saw a surprising increase of 8,800 jobs in May when a decrease was anticipated, giving local markets something to react to.
Harker’s comments about possible interest rate cuts later this year carry more weight now, especially as the US 10-year note yield rose above 4.50%. Typically, such a rise would dampen dovish speculation, but instead, it highlighted a gap between current bond market conditions and future projections. The drop in Fed funds pricing for April 2026 to 70 basis points suggested a shift in expectations that was hard to ignore—not just for immediate reactions, but also for where money is expected to be two years from now.
The increase in USD/JPY towards weekly highs showed strong buying right after the payrolls were released. This wasn’t a broad dollar rally, but it indicated where buyers were most focused. The dollar index saw gains of 25 to 35 pips that were steady yet measured, reflecting a cautious risk appetite. This is understandable as equity strength was selective; the S&P 500 rose by 1.1%, but gold decreased by $40 to $3,313, and oil went up by $1.28 to $64.65, likely driven by internal supply and demand factors rather than speculative actions.
Company news and geopolitical developments influenced market flows. Potential trade talks between American and Chinese representatives in London added to the sentiment that fundamentals might change ahead of key data. With China issuing rare earth licenses, seen as a move towards cooperation with major automakers, there was more momentum following the payroll report.
## Market Response to Economic Indicators
Currently, we are witnessing a reset, with traders reducing holdings where prices had become extreme before data surprises. For those focused on rates or volatility, the collective message from bonds, currencies, and oil is clear: while short-term surprises drive immediate moves, longer-term contracts are beginning to price in a different outlook for the latter half of the year. Given recent trends, we expect changes in dollar funding and implied rates to be significant for traders with medium-duration strategies.
What’s important now is to monitor the strength of buying in USD assets beyond the initial reaction. The employment data has recalibrated expectations rather than thrilling them. If the dollar continues to attract demand based on moderate surprises, particularly against currencies with more passive central banks, the trade may still hold despite cautious sentiment.
It’s this clarity in transactions, along with subtle adjustments in forward rates, that should provide the best insight into current liquidity positioning. While we haven’t seen a sharp reversal, conviction is not stagnant. It’s evolving, as it typically does when the market is caught slightly off guard.
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The latest Canadian employment report shows the job market is weakening gradually. Canada gained 8,800 jobs, which is a bit better than the expected decrease of 12,500 jobs. However, the unemployment rate rose to 7.0% from 6.9%.
Certain sectors, like manufacturing and transportation & warehousing, are struggling. However, growth in other areas is offsetting this decline. If this trend continues, the Bank of Canada may cut rates in July to help the economy.
Gradual Increase in Unemployment
The data indicates that the economy is stable for now, but it’s not performing at its full potential. Unemployment is slowly rising and is expected to continue increasing later this year. Positive changes regarding US tariffs and additional rate cuts are needed to stabilize the situation.
In May, Toronto’s unemployment rate hit 9%, the highest level since 2012, not counting the COVID-19 period. On the bright side, Lululemon remains optimistic about Canadian consumers, despite growing job market challenges.
What we’re seeing in the latest employment data is a job market that is quietly weakening instead of collapsing. The report shows a small increase in jobs when many expected a decline, which might seem positive. However, rising unemployment at 7% continues a worrisome trend we’ve observed since late last year.
Reduced hiring in manufacturing and logistics suggests those sectors are slowing down, possibly due to weak demand or higher costs. Meanwhile, gains in some service sectors are barely enough to keep overall job numbers from falling.
Likely Monetary Response
This steady decline makes a response from policymakers more likely. Increased unemployment cannot be overlooked, especially in major cities. With Toronto’s rate now at 9%, we’re seeing levels not seen in over a decade, except during crises. Nevertheless, Lululemon’s expectation of stable consumer behavior shows a disconnect between perception and the overall economy.
Historically, weak employment data pressures central banks to ease policies, especially when inflation risks are low. Future rate decisions will likely reflect these changes. Lowering borrowing costs is one of the few ways to support demand without government help. A response in July now seems likely based on these trends.
Markets will closely monitor how job losses affect consumer spending. An ongoing rise in unemployment over the summer could slow wage growth, which is crucial for maintaining spending. Without improvements in hiring or interest rates, confidence among workers and small businesses may falter.
As economic activity decreases, the cost of inaction grows. Keep in mind that stabilization often starts from the margins. In past cycles, similar patterns led to multiple quarters of job losses, even when initial reports seemed stable—by the time the slowdown becomes apparent, action may already be underway.
It’s important to recognize how sentiment deteriorates as jobs become scarce. We’ve seen this before. When trading based on rate expectations, it’s crucial to understand that rate cuts alone may not revive hiring if fundamental issues persist. Relief from tariffs, especially across the border, might help, but it won’t change the trend if job growth keeps declining.
Currently, we’re not in a contraction phase, but the economy is underperforming. Without stronger indicators soon, any policy responses will simply be a matter of timing.
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Walmart’s Chief Financial Officer (CFO) recently shared that consumer spending has stayed mostly stable. While Walmart feels confident about this trend, other retailers, like Target and Lululemon, have voiced concerns about possible issues in consumer spending.
Target has noticed early signs of caution among shoppers, particularly in categories like home goods and electronics, which often see decreased spending during uncertain times. Lululemon has also mentioned that buyers are being more careful, especially with discretionary purchases. These warnings have become more common during recent earnings reports.
The contrast is clear. Walmart caters to a wide range of customers who prioritize essential goods, while other retailers focus on more discretionary items. This difference is important because it helps us understand which consumer behaviors may just be temporary and which could indicate a larger change in spending habits.
The data suggests that low- to middle-income consumers continue to spend on basics, while spending from higher-income consumers might be slowing down. For those of us in the derivative markets, this situation comes with both opportunities and risks. If Walmart’s optimism is accurate, demand for essentials like food and cleaning products should continue smoothly. This provides some stability for sectors focused on essential goods.
However, if spending patterns continue this way into summer, we might see shifts within various retail sectors. This could mean that price options for apparel, home decor, or fitness items may need adjusting. Longer-term instruments might already be reflecting a mismatch in implied volatility, especially around earnings reports.
For traders dealing with short-term volatility or speculative positions, being more selective is crucial right now. Stocks heavily exposed to non-essential spending may experience bigger fluctuations, particularly if they provide weak guidance or face earnings downgrades. In contrast, companies focused on essential goods or strong discount offerings are likely to see steadier trading activity—some of which is already being factored into downside puts and calendar spreads.
In terms of strategy, it might be wise to focus on changes in consumer sentiment rather than making broad retail bets. Using long gamma trades or spreads to express views on varying performances could be beneficial in the coming weeks. We’ll keep an eye on macro indicators like consumer credit usage and real wage trends for additional insights—these indicators often appear in consumer cyclical stocks before being discussed in economic policy.
Ultimately, it’s less about whether people are spending at all and more about what they are choosing to prioritize. These priorities will influence price changes, especially as we approach the upcoming round of retail earnings.
Fig 1: Retail sales trends in various sectors.
Top trade officials from the US and China will meet in London on Monday. The US delegation includes Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Ambassador Jamieson Greer.
This meeting, set for June 9, 2025, aims to discuss the ongoing trade deal. Following the announcement, US stocks have risen sharply.
Change in Market Sentiment
The upcoming meeting signifies a clear change in attitude compared to the cautious tone earlier this year. With key officials like Bessent, Lutnick, and Greer attending, it’s more than just a routine discussion. The announcement triggered quick market reactions, showing new optimism in US equities. This wasn’t just speculation; we saw strong demand for S&P futures and a notable rise in major industrial and semiconductor stocks, indicating positive market sentiment.
Beyond tariffs, there are important issues like intellectual property protection, sector-specific subsidies, and bilateral capital flows at play. These factors influence longer-term pricing in global derivatives. Traders are positioning themselves for more stable conditions in retail and manufacturing futures, which seems justified.
However, implied volatility hasn’t dropped completely. While equity markets have stabilized, forward volatility curves remain somewhat high. This suggests that option writers are still cautious about potential risks from these discussions. It indicates careful optimism; disregarding the impact of headlines would be unwise.
Traders Change Strategies
Some traders have begun shifting from short-term contracts tied to policy-sensitive sectors to longer-term swaps and synthetic structures connected to international markets. This is a strategic move. Looking at trends in open interest in materials and logistics shows preparation for potential shifts as formal announcements approach.
We’ve also observed differences in geographic spreads. Asian equity-linked derivatives have become less correlated with S&P movements compared to previous quarters. This suggests traders are selective and not adopting a uniform approach. Dealers seem to expect a gradual convergence, indicating that progress from the talks may affect year-end contracts more than those expiring in June.
In summary, traders are adjusting their positions. The liquidity landscape is changing as well—bid-ask spreads on long-term options are tight, reflecting significant interest, especially in transport and commodities. This is intentional. Traders are not expecting a complete reversal, but they recognize the possibility of strong policy guidance.
For those closely watching these discussions and managing their investments accordingly, now is a crucial time. Focus on the details within seemingly technical outcomes; be aware of basis point adjustments, as they often signal broader shifts in sentiment.
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Nomura forecasts a drop in the USD/JPY exchange rate, expecting it to decline from 144.92 to 136 by the end of September. This prediction is influenced by Japanese investors bringing funds back home and potential pressure from Washington for Tokyo to strengthen the yen.
If the Bank of Japan takes a more aggressive stance, local yields could rise. This might lead domestic investors to prefer local bonds over foreign ones.
MUFG offers a slightly different forecast, estimating that the USD/JPY might reach 138.30. Both reports hint at a possible change in exchange rates due to various economic factors.
Major players in the market are indicating downward pressure on the USD/JPY over the medium term, with targets in the high 130s. Nomura highlights two important reasons for this expected change, both related to how domestic capital behaves and international diplomatic relations.
The first reason involves Japanese investors moving funds. As interest rates between countries start to equalize, the incentive to keep foreign assets decreases. When these funds come back home — usually by selling foreign currencies to buy yen — it creates steady demand for the yen. This process builds momentum over time.
The second reason, which may have a stronger immediate impact, is external pressure. If the dollar-yen rate approaches long-term highs, it could become a political issue. If Washington expresses concerns about a strong dollar, it might create obstacles for this currency pair.
Meanwhile, the Bank of Japan has suggested it might adjust its monetary policy. If domestic yields rise even slightly, Japanese institutions may be more inclined to invest in local bonds. This is particularly relevant for pension funds and insurers that seek yield without currency risk.
MUFG has a less pessimistic estimate, but both forecasts agree that the yen is undervalued due to domestic changes and external factors. The difference lies in timing and the extent of adjustment.
From our viewpoint, the combination of these factors calls for a shift in strategy. With spot levels near 145, there is significant potential for a decline. Implied volatilities are stable, making it a good time to establish short delta positions. Keep an eye on longer-dated JGBs, as they may signal shifts in capital flows.
It’s not just about current spot levels. The forward curve hasn’t fully accounted for the potential adjustments. The gap between current values and institutional forecasts could widen if risk aversion increases or interest in cross-border investments decreases. We should closely monitor spreads between local and foreign bonds. Although cross-currency basis swaps are stabilizing, any widening could indicate larger capital flows.
Options structures can be adjusted to benefit from a weakening dollar against the yen. Risk-reversals currently favor yen strength, supporting this strategy. Premiums are mostly balanced, providing an opportunity for layered entries through the end of Q3.
Overall, the current setup suggests it’s time to rebalance positions that have been too focused on dollar strength this year. Although we aren’t at a point where long yen positions are widely accepted, sharp rebounds often start in these quieter moments. Keep an eye on short-term yield differences and any shifts in policy commentary.
The trend of one-sided trades seems to be diminishing. We will adjust our strategies accordingly.
Amazon is pausing its hiring, raising questions about the economy and workforce strategy. Despite increasing wages for over half a million employees by 50 cents to $3 an hour, the company is stopping hiring in its main retail sector. This news comes from internal communications reported by Business Insider.
The hiring pause mainly affects corporate jobs; however, it does not impact warehouse and cloud computing staff. This is important for Amazon’s online marketplace, logistics, and grocery operations.
A Changing Workforce Strategy
Between 2019 and 2021, Amazon’s workforce grew to 1.6 million. However, it dropped to 1.55 million the following year, with more than 27,000 jobs cut since late 2022. This reflects uncertainty in the economy, as hiring has slowed without direct layoffs.
Although the wage increases are small, they don’t necessarily show confidence in sustainable growth. Instead, they might be a response to inflation, competition, or industry standards. Amazon’s retail operations are very sensitive to changes in demand, especially with ongoing challenges in consumer spending due to high interest rates and tight credit conditions.
The internal communications from Olsavsky and the corporate hiring freeze indicate that the focus is on stability rather than growth in key revenue areas. While jobs in warehouses and cloud computing are safe, this decision shows a strategic shift towards caution.
Market Reactions and Strategic Changes
Experts observing market trends interpret management’s cautious approach as a sign to tighten trading limits in the short term. Amazon’s hiring pause, without significant layoffs, suggests they are adjusting rather than facing a crisis. This adjustment might go unnoticed unless confirmed by broader economic indicators like nonfarm payroll and CPI data.
In the derivatives market, these strategic signals appear in wage-linked assets showing shifts and compression. Current trades imply expectations of stable responses in high-risk retail and logistics stocks. Structural hedges can be expensive, and sudden changes can affect potential profits before market headlines change.
Amazon’s selective hiring pause highlights a focus on executing current operations rather than pursuing long-term growth. The emphasis on wage hikes foregrounds the company’s commitment to operational effectiveness over expansion, prompting strategic adjustments in trading techniques. Reducing exposure to large-cap e-commerce and shifting towards more stable positions can help manage volatility during retail earnings reports and economic commentary cycles. Understanding these workforce decisions can provide valuable insights into expected sector performance.
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Oil prices have jumped unexpectedly, increasing by 6.5% over the past week, surprising many investors. This rise occurs even though the Organisation of the Petroleum Exporting Countries (OPEC) is adding more barrels, with Saudi Arabia planning to increase production by 411,000 barrels per day soon.
There’s a potential inverted head-and-shoulders pattern forming, which could indicate a breakout. A key resistance level is at $65, and market charts suggest a quick rise to $70-71 due to short market positioning.
Time spreads show a surprisingly bullish trend, fueled by trade optimism. Potential trade agreements with lower tariffs may help oil and other risk assets.
Recently, West Texas Intermediate (WTI) crude oil climbed by $1.34 to $64.72, reaching a session high. The sentiment was also influenced by a drop in the Baker Hughes US oil rig count, which decreased by nine, bringing the total to 442. This indicates a rapid decline in active rigs.
This sharp increase in oil prices amid rising OPEC supply, especially from Saudi Arabia, creates an unusual scenario in a market many thought was stabilizing. The current market response indicates a shift in trader sentiment and highlights the impact of anticipation and market positioning on short-term trends.
Looking at the bullish time spreads, traders seem to expect stronger demand or a tightening supply in the near term. This is significant since the increased output isn’t fully present in the market yet. Right now, it’s more about how the futures market reacts to expectations rather than the physical supply of oil.
The potential inverted head-and-shoulders pattern reflects a possible change in trend. With resistance around the $65 point and quick short covering, there’s a chance that prices could rise to $70.71, especially if liquidity and follow-through confirm the breakout. Current positioning in the derivatives market may make it vulnerable to fast upward movements.
The decline in the Baker Hughes rig count adds another dimension. A drop of nine rigs in one week suggests producers might be pulling back on new drilling, whether intentionally or not. When one region increases production while another reduces it, it creates perceived scarcity that traders respond to. This situation influences the overall tone of supply uncertainty, which is crucial in such a tightly wound market where sentiment drives volatility.
Trade policy optimism is also supporting riskier assets. Headlines about potential tariff reductions and agreements have already influenced price expectations before any official announcements. If expectations for simplified trade routes and lower tariffs continue to grow, short-duration contracts are likely to respond first, before any long-term shifts in production or consumption.
Additionally, options activity is leaning towards higher strike prices, indicating that larger holders are hedging against rapid price increases rather than preparing for a downturn. This shift suggests that the balance of fear is changing, although it may be temporary.
In markets like this, where price movements occur faster than fundamentals can adjust, taking action often outweighs waiting for clarity. Speed can be rewarding, while hesitation can lead to risks. Although it’s uncertain whether these price levels will hold, the current momentum is significant and shouldn’t be overlooked.
Patrick Harker, the President of the Philadelphia Federal Reserve, is retiring at the end of the month. He mentioned that the Federal Reserve might lower interest rates later this year.
However, predicting future monetary policy is complicated by uncertainties, especially concerning the declining quality of economic data.
Challenges in Decision Making
Harker pointed out that making decisions has become harder due to a lack of reliable data. His successor will take over next year and will have voting rights.
Harker’s remarks highlight the difficulty of establishing clear short-term monetary policy. The Federal Reserve depends on accurate data to gauge inflation, employment, and overall economic activity. However, he noted that the tools used to track these trends are starting to show problems. Data revisions are now more frequent, survey results are less reliable, and traditional indicators no longer provide the same certainty.
When a leader like Harker talks about declining data quality, it suggests a need for caution rather than a clear direction. If the data isn’t trustworthy, decision-makers may hesitate or delay actions. As a result, they might wait longer or seek more evidence before changing interest rates, even if conditions seem to warrant action.
This uncertainty affects views on rate adjustments for the rest of the year. Usually, the likelihood of lowering rates increases when inflation appears to be falling convincingly, or when growth is slowing consistently. But if the data is incomplete or inconsistent, it becomes harder to feel confident about such decisions. Consequently, there may be fewer rate cuts than anticipated, or they could happen later than the current market forecasts expect.
Effects on Market Dynamics
This situation also changes who we focus on. With Harker retiring, attention will not only be on his successor but also on how the broader voting committee analyzes low-quality data. Caution will prevail, and it will take more convincing evidence to change the current interest rate path.
For those of us watching derivative markets, the main takeaway is that uncertainty could lead to unpredictable outcomes. We might see more frequent mispricing in the timing and pace of policy changes, creating opportunities for strategic positioning, especially around meetings and significant data releases.
The environment is not static. Every Federal Reserve speaker, inflation report, and wage data will carry more weight when confidence in the long-term outlook is shaky. Traders should keep an eye on this dynamic rather than just focusing on individual headlines.
Yields may rise before falling back if markets become overly optimistic without strong data to back it up. We’ve seen situations where a weak jobs report raises expectations, only for a subsequent revision to disrupt the entire outlook. In this climate, shorter-term instruments may offer more stable pricing and less risk of sudden swings.
Volatility may not increase continuously but will likely remain higher than before. We should recognize this rather than ignore it. A calm attitude toward implied rates often fades when actual events exceed expectations, and currently, there are more variables at play, causing implied rates to fluctuate for good reason.
This period is marked by uncertainty rather than clarity. Rather than focusing on specific comments or scheduling notes, that uncertainty should be the primary concern for those involved in derivative positioning.
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