Major Currencies Sleep Through Global Turmoil

The world's major currencies are experiencing an unusual calm despite ongoing macro turmoil. According to the Financial Times' Unhedged newsletter, the euro has been trading within a tight range of $1.13 to $1.20 since mid-2025, which would be the narrowest on record if it holds.

The newsletter notes that this stability is puzzling, given the crisis in sterling and the trade spat between Canada and the US, which might be expected to have a greater impact on exchange rates. However, the euro's calm can be attributed to a tug of war between inflows and rate differentials.

Goldman Sachs analysts expect FX volatility to remain low under various economic scenarios, citing solid US economic performance as a support for the dollar. The carry trade, which thrives on decent growth and low volatility, is also contributing to the calm by lifting the dollar against the yen despite joint US-Japanese interventions.

The BOJ's recent rate hike to 1.25%, the highest since 1995, has had a limited impact on FX markets. The S&P 500 has been rangebound between 7,266 and 7,798 from June to September, with only healthcare, energy, and financials showing gains over this period.