Realised volatility (historical volatility) measures how much an FX pair actually moved over a past window — for example the annualised standard deviation of recent daily returns. Implied volatility is the volatility level embedded in option prices for a future expiry — what the options market is charging for uncertainty ahead. On event weeks (UK CPI, FOMC), implied vol often rises into the print; realised vol tells you what the spot market actually delivered afterward.
Related: what is an FX risk reversal, common mistakes trading FOMC decision day, and how interest rate expectations move FX.
Why the distinction matters
If implied vol is rich into FOMC but the decision is fully priced and guidance is dull, realised move may undershoot what options priced — “buy the rumour, fade the vol” stories desks tell carefully. If implied looks calm but the presser shocks, realised can spike and options were too cheap *ex post*. Literacy beats slogans.
Samuel & Co Trading’s assessment is that beginners should note one implied marker (for example one-week ATM vol if available from a Tier-1 screen) and one realised window before judging whether an event “moved enough”.
Event-week pattern
Into CPI or FOMC: implied vol often bid. After: implied can crush if the spot move is orderly, or stay elevated if path uncertainty remains. Realised is backward-looking; do not use yesterday’s quiet tape alone to size today’s event risk.
Link to spot trading habits
Even if you do not trade options, implied vol is a map of how expensive protection is and how nervous the market is. Wide spreads and fast spikes in spot often coincide with high implied regimes. Size and stop distance should respect that — process, not prediction.
What the terms are not
Not a signal to buy or sell straddles. Not identical across pairs — GBP/USD event vol differs from USD/JPY carry vol. Not a substitute for reading the economic calendar.
Common mix-ups
Do not confuse implied vol with the VIX (equity) index — related in risk tone, different market. Do not assume high implied guarantees a large spot trend; it prices a distribution, including two-way risk.
Habit
For each major event: write pre-event implied mood, post-event spot range, and whether vol crushed or stayed bid. Review weekly.
If you want a structured check on how you process event-week risk, a free traders assessment can highlight sizing and timing habits without turning this explainer into personal advice.
Beginner checklist
Write the release or theme in one line, the second-order channel in a second line, and what would invalidate your reading in a third. Keep energy, wages and policy path in separate mental buckets when more than one shock is live. Prefer official calendars and Tier-1 wires over social summaries when you verify a number. Review the session after London close so you learn from the tape rather than from the first headline alone.
Putting the pieces together
Keep a one-page event sheet: the official release or decision, the market-implied path before the print, the first reaction in yields and FX, and the press-conference or detail line that changed your mind. That sheet compounds faster than collecting headlines. Educational use only.
Why the second-order chain matters
Event literacy improves when you force a second-order sentence: the print changes a rate path or inflation gauge, which then touches FX differentials, equity discount rates, or gilt front ends. Writing that chain before the release reduces headline chasing and makes post-session reviews honest about what actually transmitted.
Conclusion
Realised volatility looks backward at spot moves; implied volatility looks forward through option prices. On UK CPI and FOMC weeks, compare the two instead of judging an event by the first headline alone. Educational framing only, not a forecast or trade recommendation.
