Four rotations, one framework for FX Vol

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Four rotations, one framework for FX Vol

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FX Vol Insight

Key rotations in G10 FX vol 14 July 2026

Understanding the key rotations in the G10 FX vol complex is important for identifying G10 FX Strategy

relative-value opportunities. Global

Three of the main volatility rotations — level, term structure & skew — are common Bruno Braizinha, CFA Rates Strategist

across rates, FX and equity volatility. Indeed, many of the relative-value grids monitored BofAS

in this report can be organized around these core G10 FX vol rotations. bruno.braizinha@bofa.com

Marcus Boman

The case for a high vs low beta rotation FXMLIStrategist(UK)

As we move beyond these well-established rotations, however, the idiosyncrasies of marcus.boman@bofa.com

individual asset classes become more apparent. In G10 FX vol, we argue that the fourth

economically meaningful rotation should be viewed as a high-beta vs low-beta vol

factor, whose strongest expression is a rotation between Scandi & commodity-currency

vol on one side and JPY funding vol on the other.

High beta vol fades in fading geopolitical risk Glossary:

The recent evolution of this factor shows a pronounced rise through 1Q26, peaking ATM – At the Money

around March/April, followed by a gradual decline through June and July. The increase in Dist. – Distribution

Q1 reflects a period during which volatility demand became increasingly concentrated in

PCA – Principal Component Analysis

higher-beta and commodity-linked currencies relative to the traditional funding complex.

This coincided with a pickup in geopolitical uncertainty, which likely increased market

sensitivity to global growth, commodity and energy-related risks. The subsequent decline

suggests that this premium has largely normalized as geopolitical concerns faded and