G10FX: FX Volatility Now Giving Signals Of Late Cycle Patterns; A New Regime Ahead - BofAML

Bank of America Merrill Lynch Research warns of the risks of rising volatility over the coming months, arguing that as the US economy could be entering the late stages of expansionary cycle, there are significant risks for a turn and a rise in volatility.
"We find that FX volatility is now giving signals of late cycle patterns, as the term premium is rising, volatility asymmetry is widening and the risk premium is declining to a level away from the expansionary cycle level. 
As the US economy enters the late stages of the cycle, fundamentals could become increasingly vulnerable to shocks. Volatility is likely to migrate to a new regime, with higher risks of a downturn ahead," BofAML adds.