Where policy rates create carry — and whether conditions favour it

Which way is each central bank moving — is the rate structure live or asleep?

Policy direction is the raw material. When some banks hike while others hold or cut, rate gaps open up — the differentials the next stage measures.

Passes downstream → the differentials each cycle creates

How wide is the gap between each currency's rate and the US rate?

The gap is what pays: a higher foreign rate rewards holding that currency (positive carry); a lower one means the dollar dominates. Wide gaps are the fuel — but the volatility regime decides whether they hold.

Passes downstream → whether conditions favour holding it

Does the current volatility environment reward carry, or punish it?

Wide differentials only pay if markets stay orderly. In a Favorable regime carry works; in a Hostile one (elevated volatility) carry trades unwind regardless of how wide the gap is. This gate comes straight from the FX Monitor's volatility read.

Passes downstream → the carry read, timed against events

What scheduled decision could reprice these rates in the near term?

A rate gap is only stable until the next meeting. A decision inside a week is live event risk — it can widen or collapse the differential overnight, so it caps conviction on any carry read.

Passes downstream → the read below