Implied volatility gauges actual volatility expectations and is a key determinant of FX option premium - it"s significantly higher, with limited setbacks and renewed demand warning FX investors to stay alert. The transitory inflation argument, market and central bank rate price divergence, positioning, liquidity issues, USD demand, impending central bank meetings, and heightened European lockdown fears are all contributing to risks. There were only mild implied volatility setbacks from midweek and longer-term highs - which flagged the simmering risk. Brief EUR/USD recovery raised short squeeze fears. They were compounded by topside option short covering and the subsequent hit on downside implied volatility risk premiums but that proved short-lived as EUR/USD slipped to 1.1250 on Friday. GBP/USD suffered beside EUR/USD as EUR/GBP held 20-month lows at 0.8384, and implied volatility eked out fresh gains in both pairs. EUR/CHF hit six-year lows to lift implied volatility there too. AUD/USD 1-month vol posted new recent highs at 9.5, and USD/JPY 1-month crept back to 7.4 from 6.95. USD/TRY vols posted the biggest recent gains, but can still add more.