JPM G10 FX Daily

EUR: Ask the Task Force

“Ask the task force.”

I was tempted to leave it at that this morning.

The committee is hawkish, that is clear. So the first leg of dollar strength made sense.

Where I minimised things was on the second leg, where my instinct was to take profit, not add.

Yes, Warsh insisted on price stability. But the setup of multiple task forces and the focus on reliability of alternative data felt like an attempt to delay hikes rather than prepare them.

Setting up task forces and reporting findings takes time. It also gives the Fed a framework to justify why inflation may be at or around target, rather than above it.

Still, forward guidance is now gone. And with US data continuing to perform well — retail sales yesterday being the latest example — volatility should pick up around key data releases.

Warsh is only one vote. Rates markets have moved, but there is no need to reverse the move if July payrolls and CPI come in hot.

Middle East: More Durable Than Feared

On the Middle East, it looks to me like Trump has capitulated on a lot of demands, perhaps needing the “win” before the midterms.

Previously, I thought we would get little detail and would still need to price some probability of renewed hostilities.

Now, this looks like something the Iranians should be fine getting on board with. So risks have subsided.

All in all, this is another shot in the arm for the global growth outlook.

USD View: Selective Outperformance, Carry Protected

So where does this leave us?

Not far from where we were before.

There should be some selective dollar outperformance, but growth and carry should remain protected.

That argues for an overhang of longs in G10, with the cleanest shorts being:

• CHF — favourite short: low yielder, desire for weaker currency, geopolitics subsiding.

• EUR — more of a technical short, with 1.1400 in sight.

• CAD — still preferred, although I traded this badly and have not been properly long since payrolls; looking to buy a shallow dip if possible.

On the other side, ZAR should be protected, so I am fading this USD/ZAR move a little.

I cut MXN on the initial dots. Price action below 17.20 has not impressed, and USMCA headlines were not encouraging either.

AUD longs work again as an alternative.

I have also seen a fair bit of chasing in EUR/HUF this week, so short-term I would look to get back in closer to 355. The desk still has it as a favourite, but I have left it alone over the past few weeks.

For EUR/NOK, I am digging in for now. But if Norges cannot out-hawk the market, and given that Iran risks reduce the odds of an oil spike, I will exit the fade train.

EUR/USD: Clean Technical Failure

EUR technically failed exactly where it should have, in the breakdown zone from payrolls a few weeks ago.

I do not think it should collapse given:

• The newly hawkish ECB view.

• Calmer Middle East conditions.

• Better global growth backdrop.

But as long as the US rates picture looks dollar supportive, I do not see many investors looking for EUR to trade higher either.

If you sold on a 1.16 handle, I do not mind tactically reducing to a smaller core short.

Ultimate target remains around 1.1400, which lines up with:

• Year-to-date lows

• Last August lows

Rally sellers should come in around 1.1570 today.

Trade bias: Keep smaller core EUR/USD short.
Target: 1.1400.
Sell rallies: Around 1.1570.
USD view: Selective outperformance, not broad chase.
Preferred shorts: CHF, CAD, EUR.
Risk: Warsh task-force framing is read as more dovish than currently priced.

GBP: Warsh Not Dovish, Makerfield Now the Focus

Warsh’s first meeting was interesting.

He did not submit a dot, consistent with removing forward guidance. But he was happy to let the rest of the committee submit dots, and they were very hawkish.

Most of the press conference focused on:

• New task forces

• No more forward guidance

• Data dependence

There was no dovish undertone, which was the risk feared by USD bulls.

To me, Warsh came across as pragmatic and collaborative. He looked like he was trying to buy time to convince the rest of the committee closer to his presumed view, which is probably more dovish.

For now, though, we trade the data. And the data remains more positive for the greenback.

I am not going crazy because the MOU was signed last night, but I am holding a little more USD length this morning, mainly against CHF.

UK: LFS Mixed, MPC and Makerfield Ahead

LFS was pretty mixed, with better revisions to last month’s softness. Not much to see here.

Focus now turns to:

• MPC

• Makerfield

Makerfield matters more.

Polls are open until 10pm, and results should come quickly, likely around 1am–2am Friday.

Kalshi is pricing around 90% probability of a Labour win, as Reform’s vote has been split by Restore.

The real market question is what Burnham’s tone becomes when campaigning to the left of Labour, and how quickly he can get in.

The talk is that Burnham will give Starmer the weekend before travelling to London to kick things off. I would expect a steady flow of MPs lining up to tell Starmer he is done.

The question is whether that is enough to overcome his stubbornness.

BoE: Watch the Centre

Not much new to say on the MPC.

We need to check the temperature of the internal centrists.

The curve has receded to around 1.5 hikes post-MOU.

No MPR or press conference. Looking for a 7-2 vote, with Pill and Greene dissenting.

EUR/GBP: Keep Length, Trim Into 0.8680

I am keeping EUR/GBP length.

I would trim to a core into 0.8680, but I still think very little political risk premium is priced.

Cable is trying to make the break below 1.3300 stick.

Key levels:

• Cable one-year uptrend: 1.3260

• Next support: April lows around 1.3160/70

The view that positioning is not too burdensome for GBP to go lower was supported yesterday. In our franchise, GBP was the top sold currency versus USD by:

• SHF: 2z

• DHF: 2z

• RM: 1z

Trade bias: Long EUR/GBP; cautious short GBP.
EUR/GBP trim: Into 0.8680, keep core.
Cable support: 1.3260, then 1.3160/70.
MPC: Expected 7-2 hold, Pill/Greene dissent.
Politics: Makerfield result early Friday.
Risk: BoE centre sounds hawkish enough to squeeze GBP.

JPY: Two-Year High, Still No Fireworks

See GBP section for Warsh.

It was no surprise that USD/JPY printed a fresh cycle, and two-year, high at 160.795.

But I did think the impulse in US rates would be enough to shake us out of the gamma vortex.

Incorrect.

There is not much to add here.

One could be forgiven for expecting more fireworks as we near 162. But it is hard to position for that, and equally hard to fade USD/JPY solely on the chance of MoF action.

Cross-JPY will continue to trade as a USD proxy.

Trade bias: No strong spot position.
USD/JPY: Fresh two-year high at 160.795.
Key topside: 162.
MoF: Risk rising, but hard to trade pre-emptively.
Risk: Disorderly break higher triggers intervention headlines.

CHF: SNB Keeps CHF on the Back Foot

There are some big changes happening at the Fed, but the committee was undoubtedly hawkish.

That has pushed US yields and the dollar higher.

I added to USD longs yesterday, mainly versus:

• CHF

• CAD

• EUR

These currencies should underperform for the foreseeable future.

This morning, the SNB left rates unchanged as expected and kept FX intervention guidance unchanged.

The SNB signalled an “increased willingness to intervene”, which should keep CHF on the back foot.

Focus now turns to the press conference, but higher USD/CHF should continue to work for now.

Flows yesterday showed better CHF supply, mainly from hedge funds.

Trade bias: Long USD/CHF.
SNB: Hold; increased willingness to intervene.
CHF view: Favourite G10 short.
Flow: HF CHF supply.
Risk: Risk-off revives CHF haven demand.

AUD / NZD: Hawkish Fed, But Growth Still Supports AUD Crosses

There is a lot to unpack from last night’s Fed, which delivered a hawkish outcome.

The Fed went from talking about rate reductions later this year if tariff and energy effects faded, to:

• 9 members voting for a hike this year

• 5 of those calling for two hikes

Given the MOU has effectively ended the Middle East conflict in the short term, I was a little surprised by the size of the shift.

We can debate whether Warsh was trying to play down the signal from other board members. He said members came into the meeting with a rubber on the end of their pencil and declined to contribute to the dot plot himself.

But with US exceptionalism voices getting louder, USD should continue to find support.

You could argue the five task forces may eventually change the reaction function. But findings are not expected until year-end, so they should not affect the current outlook.

That said, the signed MOU supports the global growth outlook, which pulls USD in the opposite direction.

So in the short term, USD can find support, but I have little exposure there.

I prefer to keep AUD longs on crosses versus both EUR and NZD.

NZ Q1 GDP did not provide the smoking gun to add further, but I place more weight on the forward-looking NZIER survey, which painted a bleak picture, than on backward-looking GDP data.

AUD/NZD closed above the 50dma yesterday at 1.2152.

A two-day close above this level would suggest further gains.

Trade bias: Long AUD vs EUR and NZD.
AUD/NZD trigger: Two-day close above 1.2152.
USD: Supported near term, but not the preferred expression.
NZD: Weak forward-looking survey matters more than GDP.
Risk: China/global growth disappointment or renewed USD squeeze.

CAD: Still Under Pressure Despite Big Move

The Fed was more hawkish than expected, pushing US yields and the dollar higher.

In addition, the US-Iran deal has provided relief in oil, with WTI now around $75/bbl.

Those catalysts should keep CAD under pressure.

I have been long USD/CAD for some time, and while the pair has moved more than 4% over the past six weeks, the Canadian economy still looks weak.

CAD should continue to underperform.

Flows:

• Significant USD demand post-Fed.

• CAD flows mixed but skewed toward selling.

• HF and systematics sold CAD.

• Real money bought CAD.

Trade bias: CAD underperformance continues.
USD/CAD: Still higher bias despite large move.
Oil: WTI around $75/bbl weighs.
Flow: HF/systematic CAD selling; RM buying.
Risk: Oil rebound or softer US data reverses USD/CAD.

SEK / NOK: Rebuilding NOK/SEK, SEK Back to Funder

The Riksbank update was clear.

The central bank revised the December 2026 rate path by only 5bp.

Thedeen said it is a 50/50 call whether they hike or stay on hold, while the first rate hike is not signalled until H2 2027.

That reaffirms the SEK-as-funder argument.

I started rebuilding NOK/SEK longs while also buying EUR/SEK, encouraged by the ECB’s latest moves.

This morning, focus turns to Norges Bank, which should also leave rates unchanged.

The rate path will again be the focus. JPM economists expect an increase to 4.50% for year-end, broadly in line with market pricing.

It is a high bar for Norges to out-hawk the market, but it probably does not need to.

A rate-path increase similar to JPM’s expectation should be enough to highlight central-bank divergence and encourage NOK/SEK higher.

The hawkish Fed should also weigh more on SEK than NOK, which supports the trade.

Yes, the signed MOU is procyclical, but there are better ways to express that than SEK, where growth remains tepid at best.

Oil will remain the primary driver. That is why I am running a core long rather than a larger position, but I will look for opportunities to add.

If Norges underdelivers and oil stays under pressure, I will reassess at least part of the NOK longs.

Trade bias: Rebuild NOK/SEK longs; long EUR/SEK.
Riksbank: Dovish relative; SEK remains funder.
Norges: Hold expected; path near 4.50% enough.
NOK: Supported by carry/divergence, but oil risk remains.
Risk: Norges underdelivers while oil keeps falling.