Lack of co-movement between consumption differentials and real exchange rates is a traditional indicator of a disconnect of foreign exchange markets from economic fundamentals. We present novel empiricial evidence for the disconnect between the volatilities, as opposed to the levels, of these variables. The volatility correlations are below one, but they are larger than the level correlations. We discuss the economics of volatility disconnect anomaly in settings with complete and incomplete markets, and provide an explanation of our empirical findings based on international risk-sharing of expected growth and volatility news shocks.