Despite major upcoming events like a key Fed meeting, heavy capital market activity, and energy market uncertainty, expected volatility priced into interest rate and FX markets remains unusually low. This disconnect suggests markets are unprepared for potential price swings.
September's historically heavy capital market activity is expected to be amplified this year. The convergence of a growing IPO pipeline with significant funding requirements for AI-related construction creates conditions for an unusually high volume of capital raising.
Markets are pricing only a two-thirds probability of a Fed rate hike in September. This level of uncertainty so close to a meeting is a departure from the Fed's recent, clearer communication, creating a significant potential catalyst for volatility.