FX Vol Insight: Buy the summer dip ahead of midterms

Research evidence excerpt

FX Vol Insight: Buy the summer dip ahead of midterms

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FX Vol Insight

Buy the summer dip ahead of midterms

Key takeaways 16 June 2026

G10 FX Strategy• G10 vol typically starts its election rally around 12 weeks ahead of midterms

Global

• High dispersion points to selective upside; GBPUSD vol screens most attractive

Bruno Braizinha, CFA

• However, it is to early to go long right now. We prefer waiting out the grind lower and Rates Strategist

buying vol around mid-August BofAS

bruno.braizinha@bofa.com

Marcus Boman

Buy vol 12 weeks ahead of US midterms FXMLIStrategist(UK)

As geopolitical risk is fading with the US and Iran deal due to be signed on Friday, we marcus.boman@bofa.com

look ahead to the largest known risk for H2: the US midterms. Historically, vol tends to Arjun Goyal

Equity-Linked Analyst

start its election rally around 12 weeks ahead of the midterms and then continue higher BofAS

in the following weeks (Exhibit 1). However, dispersion is generally high until close to the arjun.goyal@bofa.com

election, indicating that only selective pairs are driving the vol (Exhibit 3).

Midterm positioning: long GBPUSD vol around mid-August

Heading into the election, long GBPUSD vol seems attractive to us. GBP vol has

generally outperformed in the weeks leading up to US midterms, it screens as cheap

across pairs and tenors, its sensitivity to global vols has been elevated since Brexit, and Glossary:

the next UK budget event is scheduled shortly after the US midterms. ATM – At the Money

However, given that vol tends to compress into the summer, we would caution against Dist. – Distribution

going outright long right now. Instead, waiting out the grind lower and buying around PCA – Principal Component Analysis

mid-August would be our preferred midterm strategy.