JPM G10 FX Daily

EUR: Still Waiting for the Red Headline

Another weekend has passed without a deal — even though “they are desperate for a deal.”

That is still not enough to roil markets. We remain stuck in this stasis despite ceasefire-defying “defensive” attacks and continued aggression in Lebanon.

The market feels split on the medium-term dollar view and is not massively positioned. Our strategists expect US exceptionalism, a hawkish Fed and real yields to support the USD. Others argue that once an Iran deal lands, global growth can rebound and reignite the dollar selloff from earlier in the year.

My view sits somewhere in the middle.

If US data is strong this week during the Fed blackout into Warsh’s first meeting, the market will likely read it as hawkish — but it also reinforces economic resilience. At the same time, you cannot be mega long USD when a Middle East deal could land at any point.

Month-end price action was noisy, as expected.

I added to CHF shorts. The franc looks uncomfortably strong for the SNB, especially when the rest of the market is not exactly rushing into safe havens. Global yields make CHF stand out as a funder, and strong US data this week would add to that. More US corporates are also issuing Swiss bonds, with Amazon the latest example.

I also bought some USD/CAD after very disappointing Canadian data. The structural issues in Canada have not gone away. The market has been trying to play a turnaround trade, but I still do not see it.

In EM, I am rotating from ZAR to MXN longs to align with strategy in CAD/MXN.

For now, we are still waiting for a deal to get out of the way — maybe it becomes “buy the rumour, sell the fact.” Then we also need this week’s US data to give us something more substantial than frustrating range trading.

EUR participated in the month-end dollar selloff but stalled at proposed key resistance. We have been around 1.1650, give or take, for the last couple of weeks. There is very little to add.

The longer this uneasy Middle East equilibrium persists, the more the Eurozone is hurt through confidence and growth. That is somewhat in the price, but the market is also still expecting some kind of deal.

Inflation data has been firm enough to keep the ECB on track to hike next week with a hawkish message. That too is already in the price.

The longer EUR/USD remains below 1.1700, and especially if it stays there even after a deal, the more it reinforces the bearish case. But honestly, better to wait.

Trade bias: Light EUR bearish bias, but wait for confirmation.
Key level: 1.1700.
Current magnet: 1.1650.
Bearish confirmation: Failure to reclaim 1.1700 even on an Iran deal.
Catalysts: US data, Iran headlines, ECB next week.
Preferred USD expression: Short CHF and CAD rather than chasing EUR here.

GBP: Position Adjustment Looks Done

Still not over the finish line for the Iranian MOU, despite endless headlines late last week suggesting we were on the precipice.

This remains hard to trade, but the “buy the rumour, sell the fact” mindset feels prevalent. I would keep trading with a USD-positive bias.

Month-end is now behind us. The May US data round is next:

• NFP Friday

• CPI next Wednesday

• Then the crucial Fed meeting, where the market will be very keen to see which Warsh we get.

I added a little more USD length on Friday, mostly via CHF.

For sterling, there is not much new. Focus has drifted away from UK politics as we are still some distance from finding out the next Prime Minister, and most controversial policies are on the back burner for now.

There is also very little UK data over the next week or two to change the softer flavour from the latest price and activity round.

I find it encouraging that SHF have been huge GBP buyers since Burnham softened his fiscal comments. That suggests the resulting position adjustment is now behind us.

Still, it is hard to see a near-term catalyst for idiosyncratic GBP softness. So I stuck to the plan and reduced EUR/GBP length back to more of a core position around 0.8680.

Trade bias: Core long EUR/GBP, reduced size.
EUR/GBP range: 0.8600/0.8700 should hold for now.
Cable support zone: 1.3370/80.
Cable resistance zone: 1.3490/10.
GBP downside catalyst: Politics heats up again closer to Makerfield.
USD catalyst: NFP, CPI, and Warsh’s first Fed.

JPY: Month-End Could Not Knock USD/JPY Off 159

Month-end USD selling tried to shake USD/JPY off the 159 handle, but failed. The glacial grind toward 160 has resumed as markets wait for final sign-off on the Iranian MOU.

Very little has changed.

The MoF intervention amounts were a little larger than the more immediate BoJ data implied, but I am not sure that changes much now.

I still think the authorities are not done.

I am keeping small tactical JPY length, expressed versus CHF.

Trade bias: Small long JPY.
Preferred expression: Short CHF/JPY.
USD/JPY: Grinding from 159 toward 160.
Policy risk: MoF not done.
Risk: If no action materialises near 160, JPY shorts may rebuild further.

CHF: Added to Shorts on Month-End Strength

CHF strengthened again at month-end, taking:

• USD/CHF briefly below 0.7800

• EUR/CHF below 0.9100

We used that move to add to CHF shorts, mostly against USD.

We have been bearish CHF for a while, and the case still holds:

• CHF is low-yielding.

• The market is long CHF.

• The SNB does not want a stronger currency.

• Global yields make CHF a standout funder.

• US exceptionalism could support USD/CHF, especially with NFP on Friday.

• Strategy flags USD/CHF as one of the most undervalued pairs.

The “No to 10 Million” vote is also coming into focus. If approved, it would have underlying implications for Swiss growth and EU relations.

We are short CHF against a basket of USD, AUD and JPY.

Trade bias: Short CHF.
Preferred expressions: Long USD/CHF, long AUD/CHF, short CHF/JPY.
Recent add: Month-end CHF strength.
USD/CHF reference: Briefly below 0.7800.
EUR/CHF reference: Below 0.9100.
Risk: Genuine risk-off finally restores CHF haven demand.

AUD / NZD: Rebuilding AUD/NZD Into Support

Last week was all about the AUD/NZD unwind after the hawkish RBNZ and softer Australian monthly inflation print.

No surprise: SHF sold the cross for four consecutive days with us.

Now positioning is much cleaner after a 2.5% fall from the highs. The question is whether it is time to re-engage.

The argument for long AUD/NZD is still there:

• Pure carry support.

• Terms-of-trade support for Australia.

• Long-held view of local hedging support from pension funds.

• Positioning is now lighter.

Support sits between 1.1925/1.1961, where we find both trendline support and the 100dma. I will lean against that support zone.

Australian GDP this week is important domestically, but I have tentatively started rebuilding longs.

Trade bias: Tentatively rebuild long AUD/NZD.
Support zone: 1.1925/1.1961.
Why now: Cleaner positioning after 2.5% fall.
Catalyst: Australia GDP this week.
Risk: Further NZD hawkish repricing or weak Australia GDP.

CAD: Canada’s Structural Problems Are Still There

Canada’s Friday data was weak.

The economy slipped into technical recession, with 1Q annualized GDP at -0.1% versus +1.5% consensus.

Our economists had expected a 1Q rebound driven by household consumption. Consumption did rise 1.5%, but the savings rate dropped sharply to 3.5%. Combined with plunging government spending and business investment, that left growth much weaker than expected.

The collapse in business investment is likely a direct effect of ongoing trade-related uncertainty, with manufacturing and construction output also down meaningfully.

This data reaffirms the short CAD case.

Price action was disappointing, likely due to idiosyncratic month-end flows, but we added further to CAD shorts.

Flows supported the view, with significant CAD supply on Friday, mainly from hedge funds.

Trade bias: Short CAD.
Added: More CAD shorts after GDP.
Preferred expressions: Long USD/CAD and short CAD crosses; CAD/MXN aligned with strategy.
Macro driver: Technical recession and weak investment.
Risk: Oil/risk relief temporarily supports CAD.