Barclays
FX Outlook 2026: Navigating the Turn
FX Volatility
Barclays volatility outlook, carry-to-vol analysis, and event risk
Carry-to-Vol Ratios
Higher ratio = more attractive carry trade. Color = quality score
Quality Distribution
Carry trade quality scores
Carry Pairs: Live Rate Tracking
Current live rates for BARC carry-to-vol pairs
FXO Themes for 2026
Directional FXO for USD bearish themes
Express USD bearish view via EUR/USD and GBP/USD call spreads. AUD/USD calls for commodity upside. USD/JPY puts for BoJ normalization. Cost-effective structures preferred given low vol.
Selling rich EM skew
USD/EM skew at historically rich levels. Sell EUR/TRY and EUR/HUF topside one-touches to harvest premium. EUR/PLN offers particularly attractive carry-to-vol.
GBP correlation opportunities
GBP correlations with FTSE and rates are mispriced. Buy GBP/USD-FTSE dual digitals. Sell GBP correlations vs EUR given fiscal divergence theme.
Election event vol in 2026
Hungary April elections nearly fully priced. Brazil October elections offer buying opportunities on dips. US midterm pricing remains subdued -- too early to position.
Carry-to-vol in EM remains attractive
CNH/INR, EUR/PLN, and TRY/JPY ERKOs offer favorable carry-to-vol ratios. Express carry views via options to limit downside in event-heavy 2026.
AUD vol underpriced
AUD implied vol is cheap relative to macro uncertainty. Buy AUD/USD forward vol agreements as protection for commodity cycle shifts. AUD-equity correlations at extremes.
Cross-asset hybrids
FTSE-GBP/USD and SX5E-EUR/CHF dual digitals attractive given low implied correlations. Express macro views at significant discount to standalone options.
Event Volatility Profile
Current vs historical average
Election & Event Risk
US Midterm Elections
Too early to position; expect gradual build from Q3
Hungary Parliamentary Elections
Richly priced at 2.8% breakeven. Consider selling topside EUR/HUF strikes.
Brazil General Elections
Fairly priced. Look for dips in Q2 as buying opportunity for BRL protection