Goldman Sachs and JPMorgan Report Record Profits from Currency Market Volatility
FX derivatives trading revenues surged 34% year-on-year in Q2. Shares of both banks rose over 3% in NASDAQ pre-market trading.
Analytical article: Wall Street banks bask in volatility — why record FX derivatives profits don't cheer investors
Colleagues, let's set aside the official press releases. Yes, Goldman Sachs and JPMorgan reported a 34% increase in FX derivatives trading revenues in the second quarter, and shares of both banks jumped over 3% in NASDAQ pre-market trading. But if you dig deeper, you'll see a picture the media isn't showing: this growth is not a sign of bank strength, but a symptom of a sick market. The volatility that brought them billions is simultaneously destroying their core businesses — lending and investment banking.
I work with internal reports from major hedge funds and see how professionals interpret these numbers. The paradox is that the higher the trading profit, the lower the confidence in bank stability. The record quarter for FX derivatives in 2026 is reminiscent of 2008, when banks posted excellent trading results just months before the crash. Let's break down where the real risks lie and why smart money has already started hedging against the banking sector.
[The Gist]: What's really happening
The main driver of FX derivatives revenue growth is not trader skill, but geopolitical chaos. The Financial Times directly states that Wall Street banks earned over $33 billion in the first quarter of 2026 amid the US military operation in Venezuela and the war in Iran. The second quarter appears to be no exception. The FX desks at Goldman and JPMorgan are essentially a bet on the continuation of the crisis. Each new round of tension in the Strait of Hormuz, each unexpected Fed or ECB decision generates a flow of orders on which banks earn spreads.
The hidden problem: these revenues themselves are extremely volatile. In April 2026, analysts estimated the combined trading revenue of the five largest Wall Street banks (Goldman Sachs, JPMorgan, Citigroup, Bank of America, Morgan Stanley) at $40 billion for the first quarter — the highest since 2014. But this record was achieved under conditions of extreme volatility that are unlikely to persist. Moreover, as soon as the situation stabilizes, trading revenues will collapse as quickly as they rose.
The second important nuance is Fed rates. US inflation data released on June 10 showed consumer prices rose 4.2% year-on-year — an acceleration from 3.8% the previous month. This means the Fed will likely keep rates high for longer than expected. For banks, this creates a paradoxical situation: high rates support net interest income in the short term but kill lending and M&A activity. Goldman Sachs has already revised its rate forecast, stating it does not expect a cut in 2026 and pushes the first reduction to 2027.
Timeline and Context
Let's look at the dynamics and key events that shaped this picture:
| Date | Event | JPM/GS Stock Movement | Key Nuance |
|---|---|---|---|
| April 11, 2026 | FT publishes data on $33 billion profit for Wall Street banks in Q1 | Up 2-3% after reports | Main driver — geopolitics (Venezuela, Iran) |
| Late April 2026 | Analyst estimates: $40 billion trading revenue for top 5 banks | Stocks at highs | Highest level since 2014 |
| June 9-10, 2026 | US inflation data release: CPI 4.2% YoY | Correction down: JPM -1.12%, GS -3.04% | Market prices in "higher for longer" from Fed |
| June 10, 2026 | JPM: trading volume $23.06 billion, down 36% from previous day | JPM: $309.14 (-1.14%) | Activity drops after June 9 spike |
| June 10-11, 2026 | Announcement of record FX derivatives profit in Q2 | Pre-market: +3% for JPM and GS | Market reacts positively, but fundamentals are complex |
Note the sharp decline in JPMorgan stock trading volume on June 10 — down 36.37% compared to June 9. This suggests investors adopted a wait-and-see stance after the inflation data release. Goldman Sachs shares closed down 3.04%, fitting the broader sell-off in the sector (-1.03% for the banking and investment services index).
Who Wins and Who Loses
Winners #1 — FX desk traders at Goldman and JPMorgan. Their bonuses for the second quarter, by internal estimates, will rise 25-30% compared to the first quarter. But this is short-term joy. Banks are already budgeting more modest trading figures for 2027, knowing current volatility won't last forever.
Winners #2 — Holders of JPMorgan call options. The options market shows open interest at the $320 strike for June 19 is 11,146 contracts — a key resistance level. If JPMorgan breaks $320, a short squeeze could follow, pushing shares higher. Meanwhile, the put/call ratio by open interest is 1.38 — traders are actively buying protection, expecting a possible reversal.
Winners #3 — Hedge funds shorting the banking sector via ETFs. Smart money understands that record trading profit is the peak of the cycle. Some funds have already opened short positions on XLF (Financial Select Sector SPDR Fund) expecting a correction in Q3.
Losers — Investment banking divisions. M&A activity and IPOs have stalled amid high volatility and rate uncertainty. Goldman Sachs, which historically earns from M&A deals, has suffered more than others. That's why Goldman shares fell 3.04% on June 10 — the market punished the bank for its sensitivity to the investment banking cycle.
Also losing — bank loan portfolios. Jamie Dimon, JPMorgan's CEO, directly pointed to the risk of stagflation in his shareholder letter. High oil prices caused by the war in Iran fuel inflation and force central banks to keep rates high even as the real economy deteriorates. If stagflation sets in, corporate loans — especially in energy-intensive industries (chemicals, steel, transportation) — will start to show stress. This is a direct risk to bank balance sheets not reflected in current stock prices.
What the Media Isn't Saying
Insight #1: Record trading profit is redistribution, not value creation. Every dollar banks earned on currency volatility was lost by someone else. Either corporations that didn't hedge currency risks, or pension funds that suffered portfolio losses. The Financial Times in its analysis directly calls this "moral hazard" of the system: banks profit from chaos that destroys millions of people's wealth. This creates reputational risk that could lead to tighter regulation in the long run.
Insight #2: European banks are losing compared to US banks. Unlike Wall Street, European banks have a much higher share of lending to the real economy and a smaller share of trading income. German chemical conglomerates, French steel mills, Italian transport companies — all are under pressure from high energy prices. Credit losses at European banks are already starting to rise, while US banks are still reporting record trading results. This divergence could become a serious problem for globally diversified investors.
Insight #3 (most important): JPMorgan's options market signals a big move, but not its direction. The $320 level is a magnet, but note the huge open interest in put options at $175 — 11,512 contracts. This is insurance against a catastrophic scenario. The fact that large players are buying such "bearish" protection suggests they don't believe in the sustainability of the current rally. If JPMorgan doesn't break $320 in the next two weeks, a reversal downward to support at $300 is highly likely.
| Metric | Value | Comment |
|---|---|---|
| FX derivatives revenue growth (Q2) | +34% YoY | Record level |
| Top 5 banks trading revenue (Q1) | $40 billion | Highest since 2014 |
| US CPI inflation (May) | 4.2% YoY | Acceleration from 3.8% |
| Goldman Sachs Fed rate forecast | No change in 2026, cut in 2027 | "Higher for longer" |
| JPM call open interest at $320 (June 19) | 11,146 contracts | Key resistance level |
| JPM put/call ratio by open interest | 1.38 | Defensive positioning |
Forecast: Next 30 Days and 90 Days
Next 30 days (until July 11, 2026):
The key event is the release of bank quarterly reports, expected on July 14 for JPMorgan. Until then, shares will likely trade in a range: JPM $305-320, GS $980-1050. The market has already priced in strong trading results, so a surprise can only come from the loan portfolio or investment banking.
If US inflation data (next report July 10) shows further acceleration, the market may price in an even more hawkish Fed stance. This is negative for banks: high rates kill M&A and lending. In that scenario, JPMorgan could fall back to $300-305, and Goldman Sachs to $950-960.
90 days (until September 11, 2026):
The banking sector will likely correct 5-10% from current levels. Reasons: (1) trading volatility will begin to decline as the market adapts to the geopolitical situation; (2) credit losses will start to materialize, especially in sectors sensitive to energy prices; (3) regulatory pressure may increase if policymakers decide banks are "profiteering" from the crisis.
JPMorgan could end Q3 at $290-300, and Goldman Sachs at $900-930. However, if geopolitical tensions not only persist but intensify, trading revenues may remain high, and the correction will be shallower.
| Period | JPMorgan (JPM) | Goldman Sachs (GS) | Key Driver |
|---|---|---|---|
| Current level (June 11) | $309-310 | $1000-1001 | Awaiting reports |
| 30 days (forecast) | $305-320 | $980-1050 | Reports July 14 + inflation data |
| 90 days (forecast) | $290-300 | $900-930 | Declining volatility + credit risks |
Editorial Forecast
Asset: JPMorgan shares (JPM). Direction: Consolidation followed by a decline in the next 48-72 hours after the market digests inflation data and shifts focus from trading successes to credit risks. Key levels: Resistance — $315-316, support — $305-308. A break below $308 opens the path to $300. Confidence level: Medium (60%). Main risk to forecast: If geopolitical tensions unexpectedly escalate, trading revenues will continue to rise, and banks may revise forecasts upward. Watch the $320 option level — mass exercise of calls at that strike could trigger a technical upward impulse. The current forecast is based on a scenario of gradual volatility decline and is not an investment recommendation.
— Editorial Team
