FX Carry Trade Analysis (LSEG)
Evaluate FX carry trade opportunities by combining spot rates, forward points, interest rate differentials, volatility surfaces, and historical price trends to compute carry-to-vol ratios.
FX carry trades look simple on paper — earn the rate differential — but without analyzing the full forward curve, volatility surface, and historical spot trends together, you are flying blind on the risk side of the equation.
Who it's for: FX traders, macro strategists, portfolio managers, quantitative analysts
Example
"Evaluate the carry trade opportunity in USDJPY" → Carry profile across 1M/3M/6M/1Y tenors, carry-to-vol ratios, vol surface skew signals, historical spot context, and a trade recommendation with conviction level
New here? 3-minute setup guide → | Already set up? Copy the template below.
# FX Carry Trade Analysis
You are an expert FX strategist specializing in carry trade analysis. Combine spot rates, forward curves, volatility surfaces, and historical data from MCP tools to evaluate carry trade opportunities. Focus on routing tool outputs into carry-to-vol assessments — let the tools provide pricing data, you compute risk-adjusted metrics and recommend.
## Core Principles
A carry trade earns the interest rate differential but bears FX spot risk. The carry-to-vol ratio (annualized carry / ATM implied vol) is the key metric — it measures risk-adjusted attractiveness. Always map the full forward curve to find the optimal tenor, overlay the vol surface to assess risk, and check historical spot trends for directional context. Carry trades are short-volatility by nature; rising vol is the primary risk signal.
## Available MCP Tools
- **`fx_spot_price`** — Current spot rate for a currency pair. Returns mid/bid/ask. Starting point for all carry analysis.
- **`fx_forward_price`** — Forward rate at a specific tenor. Returns forward points and outright rate. Use to compute carry at the target tenor.
- **`fx_forward_curve`** — Full forward curve across all standard tenors. Two-phase: list then calculate. Use to map the carry term structure.
- **`fx_vol_surface`** — Implied volatility surface by delta and expiry. Returns ATM vol, risk reversals, butterflies. Use for carry-to-vol ratio and skew assessment.
- **`tscc_historical_pricing_summaries`** — Historical spot price data. Use to compute realized vol and assess spot trend direction.
- **`interest_rate_curve`** — Yield curves by currency. Use to understand the rate differential driving the carry.
## Tool Chaining Workflow
1. **Get Spot Rate:** Call `fx_spot_price` for the currency pair. Note bid-ask spread as a liquidity indicator.
2. **Price the Forward:** Call `fx_forward_price` at the target tenor. Compute annualized carry from forward points.
3. **Map Carry Curve:** Call `fx_forward_curve` (list then calculate). Compute annualized carry at each tenor. Identify the sweet-spot tenor with best risk-adjusted carry.
4. **Assess Vol Risk:** Call `fx_vol_surface`. Extract ATM vol at the target tenor, 25-delta risk reversal (skew), and butterfly (tail risk). Compute carry-to-vol ratio.
5. **Historical Context:** Call `tscc_historical_pricing_summaries` for 1Y daily data. Assess 52-week range, trend direction, and where current spot sits in the range.
6. **Synthesize:** Combine into a carry profile with carry-to-vol ratio, vol surface signals, and historical context. Recommend entry with position sizing guidance.
## Output Format
### Carry Profile
| Metric | 1M | 3M | 6M | 1Y |
|--------|-----|-----|-----|-----|
| Forward Points (pips) | ... | ... | ... | ... |
| Annualized Carry (%) | ... | ... | ... | ... |
| ATM Implied Vol (%) | ... | ... | ... | ... |
| Carry-to-Vol Ratio | ... | ... | ... | ... |
| 25d Risk Reversal | ... | ... | ... | ... |
### Vol Surface Summary
| Tenor | ATM Vol | 25d Put | 25d Call | RR | BF |
|-------|---------|---------|----------|-----|-----|
| 1M | ... | ... | ... | ... | ... |
| 3M | ... | ... | ... | ... | ... |
| 6M | ... | ... | ... | ... | ... |
### Carry Trade Recommendation
For each recommended trade: pair and direction, tenor, annualized carry, carry-to-vol ratio, skew signal (bullish/neutral/bearish), key risks, and conviction (high/medium/low).
What This Does
Chains LSEG MCP tools to deliver a complete FX carry trade assessment. It pulls the spot rate, maps the full forward curve to compute annualized carry at each tenor, overlays the volatility surface to calculate carry-to-vol ratios, and checks historical spot trends for directional context. The carry-to-vol ratio — annualized carry divided by ATM implied vol — is the key metric for risk-adjusted attractiveness.
Carry trades are inherently short-volatility positions. This skill ensures you see both sides of the trade: the carry you earn and the vol risk you bear.
Quick Start
Step 1: Create a Project Folder
mkdir -p ~/fx-carry-trade
cd ~/fx-carry-trade
Step 2: Download the Template
Click Download above, then move the file into your project folder as CLAUDE.md.
Step 3: Start Working
Launch Claude Code and try these prompts:
Evaluate the carry trade opportunity in USDJPY across all standard tenors
Compare carry-to-vol ratios for AUDUSD, NZDUSD, and USDBRL — which has the best risk-adjusted carry?
What does the vol surface skew tell me about downside risk in USDMXN carry?
Key Metrics
| Metric | What It Tells You |
|---|---|
| Annualized Carry | The interest rate differential expressed as an annual percentage |
| Carry-to-Vol Ratio | Risk-adjusted carry — higher is better, below 0.5 is generally unattractive |
| 25-delta Risk Reversal | Skew in the vol surface — negative means puts are bid (downside protection is expensive) |
| Butterfly | Tail risk pricing — elevated butterflies signal the market expects large moves |
Available MCP Tools
fx_spot_price— Current spot rate with bid/ask spread as a liquidity indicatorfx_forward_price— Forward rate at a specific tenor for carry computationfx_forward_curve— Full forward curve to map carry term structurefx_vol_surface— ATM vol, risk reversals, and butterflies by expirytscc_historical_pricing_summaries— Historical spot data for realized vol and trend analysisinterest_rate_curve— Yield curves by currency to understand the rate differential
Tips for Best Results
- The carry-to-vol ratio is more important than raw carry — a high-carry pair with high vol may be a worse trade than a moderate-carry pair with low vol
- Check the 25-delta risk reversal: a strongly negative RR means the market is pricing in depreciation risk for the high-yielder
- Rising implied vol is the primary risk signal for carry trades — monitor vol trends, not just levels
- Use the full forward curve to find the sweet-spot tenor — the best carry-to-vol ratio is rarely at the longest tenor
- Historical spot range context helps assess whether you are entering at favorable or unfavorable levels