After a period of relative stability in the foreign exchange (FX) market for much of the first half of this year, currency volatility is rising from a very low base level due to a number of factors.

For one thing, more than half of the world's population is going to the polls in 2024, making this one of the most geopolitically active years we've seen in decades. When French President Emmanuel Macron called for a snap election in June, the euro dropped to a two-year low against the pound. As more elections occur in the next few months, including of course the U.S. presidential election, currency volatility is likely to increase over the remainder of the year.

Interest rates are another key factor influencing currencies. Globally, central banks initiated fewer rate cuts than expected in the first quarter of 2024, with the Bank of England (BOE), European Central Bank (ECB), and U.S. Federal Reserve all following the same path of delayed action, creating market uncertainty as participants bet on which will be first to ease.