JPM G10 FX Daily

EUR: Relief From Panic, But Still an Uneasy Steady State

There has been some relief from Wednesday’s panic extremes.

As expected, the Middle East situation remains fluid with no certainty around any endgame.

Noise has clearly ratcheted up this week.

But I do not feel we are that far from where we started the week: an uneasy steady state into the August 60-day deadline.

The market was positioned fairly comfortably post-payrolls, so the noise was unsettling.

But if things go quiet again and CPI comes within spitting distance of expectations, I would expect a low-volatility couple of weeks into the July FOMC.

That would be handy, as I am off for the next couple of weeks.

Portfolio: Persevering With ZAR and HUF

I am going to persevere with rand and forint longs as core positions.

I trimmed a few of the extras on this dip.

The Japanese comments overnight felt a little off the cuff, and it is not totally clear there is an actual game plan.

But I have banged on about the flow dynamic in the past as the thing that could turn JPY.

Bear in mind, I did my two-weeker in July 2024.

EUR/USD: Range Still Favoured

I do not have much to add on EUR given the tight ranges.

My feeling is that unless US inflation prints red hot, it will be hard to extend EUR/USD downside from here.

The pair has already fallen substantially since May, and more consolidation looks likely.

I have outlined earlier this week why EUR should be somewhat cushioned here.

If I were here, I would leave room to sell a squeeze onto a 1.15 handle.

Key levels:

• Above 1.1650:
  Clears all the falling moving averages and pushes EUR/USD toward the middle of the year’s range. This is the risk point for rally sales.

• Below 1.1340 on a closing basis:
  This Fibonacci level would make medium-term parts of the franchise more uncomfortable.

Trade bias: Neutral/range EUR/USD.
Sell zone: Squeeze onto 1.15 handle.
Risk point: Above 1.1650.
Downside trigger: Close below 1.1340.
Catalyst: US CPI next week.

Good luck over the next couple of weeks.

GBP: Sterling Bid, But It Has Done Too Much

Not much has changed for sterling.

It remains bid.

But I think it has done too much.

Burnham is all but done, with support from 322 of 403 MPs, which should surprise nobody.

Once he is in and we get Miliband — priced at 63% on Polymarket — I think the route to nervousness becomes shorter.

Other than that, media attention is focused on the Norway game tomorrow and Count Binface himself.

There is not much for the currency there.

Flows Still Supportive, But DHF Turning

Flows:

• SHF GBP buy streak: 11 sessions

• RM GBP buy streak: 4 sessions

• DHF have been better sellers for the past 5 sessions after significant post-by-election accumulation

Key levels:

• EUR/GBP: 0.8470/0.8600

• Cable moving-average cluster: 1.3394/04

• Cable next resistance: 1.3470/00

Cable managed a marginal close through the MA cluster.

I am long small EUR/GBP here.

Trade bias: Long small EUR/GBP.
EUR/GBP range: 0.8470/0.8600.
Cable resistance: 1.3470/00.
Risk: GBP flow momentum persists and EUR/GBP breaks lower.

JPY: GPIF Headline Is a Big Signal

I only wrote this yesterday:

“GPIF finally put me out of my misery on Friday — there is always next year!”

So I found the timing of the red headline overnight comical, but also super interesting:

KATAYAMA: TO PROMOTE INVESTMENT IN JAPAN ASSETS BY GPIF, OTHERS

It is claimed to be independent.

But GPIF reports directly to the Ministry of Health, Labour and Welfare, and therefore ultimately to Takaichi.

So there will be influence.

Why announce this or call upon them publicly?

Because this is a long process, and authorities need an immediate signalling effect.

This is born from the fact that authorities have simply had enough of weak JPY at these levels.

It also fits with recent consideration of BoJ policy-working tweaks in the government’s economic blueprint.

Mechanics: GPIF Has Room to Shift

The mechanics matter.

GPIF can deviate buckets by 6% without an official asset-allocation change.

You can do the math on the roughly $2trn beast.

We get quarterly updates on those buckets, released one month later on the first Friday of the next month.

So the next should be 7 August for end-June positioning.

Technically, GPIF can now change strategy outside the five-year cycle.

I thought this would happen at the end of the fiscal year.

Our Strategy team thinks it can happen at any time.

Regardless, this is not only about GPIF flows.

It is a broader signal to the rest of the Japanese real-money community, and it is massive.

This signal will start with basket deviation.

Clearly there is more to write and ponder here.

But I sold USD/JPY this morning and will invest in JPY upside.

First support is 160.50.

Trade bias: Short USD/JPY; invest in JPY upside.
Signal: GPIF/local-asset push is major JPY-supportive rhetoric.
First support: 160.50.
Risk: Signal remains verbal and USD/JPY resumes grind higher.

CHF: Still Short CHF, But CPI Will Dictate USD Trend

USD/CHF moved lower overnight, mostly on the GPIF headlines.

Those headlines pushed USD lower across the board.

The next big market risk event is US CPI next week.

That should dictate the USD trend for the next couple of weeks.

Overall, we still like being short CHF, mainly against high-beta longs elsewhere.

Trade bias: Short CHF, mainly vs high beta.
Driver: GPIF headline weighed on USD broadly.
Catalyst: US CPI next week.
Risk: Weak USD trend drags USD/CHF lower.

AUD / NZD: Wrong on AUD/NZD; Still Long AUD/USD

Sometimes you just have to hold your hands up and admit you are wrong.

That is certainly the case with NZD and the RBNZ.

While the meeting itself did little to derail my view, I did not fully appreciate the hawkish comments from Breman and the subsequent unwind in NZD shorts.

That was despite our franchise being a NZD buyer for the previous two days.

With AUD/NZD now below the 100dma and the subsequent break of the 12-month trendline around 1.2065, I have moved to the sidelines.

AUD: Simplified Into USD

I retain AUD longs, but have simplified the view and am now weighted more against USD.

Next week’s US CPI will be decisive.

But with no fresh Middle East escalation overnight, I think the summer of carry can continue.

After this morning’s soft Norwegian inflation print, Australia likely remains the “top dog” in G10.

That should help AUD move higher.

Also, if Japan’s Finance Minister calling for pension funds to invest domestically triggers some reversal of the recent USD/JPY rally, that should weigh on USD more broadly.

Technically, while AUD/USD is above the 200dma around 0.6876, the bias remains long.

Trade bias: Long AUD/USD; flat AUD/NZD.
AUD/USD key support: 0.6876 200dma.
AUD/NZD: Sidelines after break of 1.2065 trendline.
Catalyst: US CPI next week.
Risk: Hot CPI revives USD and breaks AUD/USD support.

CAD: Bearish Bias, But Moving Toward Neutral

USD/CAD traded largely sideways yesterday, even as the desk saw steady real-money demand for the pair.

Regular readers know I have been bearish on Canada for some time, driven by:

• Softer growth profile

• Ongoing trade uncertainty

• Subdued inflation

• BoC unlikely to hike anytime soon

So I have maintained a short CAD bias over recent weeks and months.

Today’s payrolls release is the next key catalyst.

However, with USD/CAD repeatedly stalling near 1.4200, I am increasingly inclined to move to a more neutral stance.

That is especially true if this afternoon’s data comes in stronger than expected and shifts the balance of risks against the trade.

Trade bias: Short CAD bias, but close to neutral.
USD/CAD resistance: Repeated stalls near 1.4200.
Catalyst: Canada payrolls today.
Risk: Strong jobs data argues for reducing CAD shorts.

SEK / NOK: Took Profit on EUR/NOK Shorts

Regular readers know I suggested selling EUR/NOK above 11.30 — you are welcome.

But after this morning’s CPI print, lower oil, and the fact that I am out next week for a well-earned rest, I have taken profit.

Due to technical issues, we only received the headline number.

It came in at 2.7%, which was:

• 0.4pp below market expectations

• 0.5pp below Norges Bank’s forecast

Some will be quick to dismiss the release as preliminary.

But SSB noted that the missing data will have very limited impact.

Therefore, the print should be taken at face value.

It should be of some comfort to Norges Bank, and we can expect some repricing of the August meeting.

That said, there is still another inflation print before the 13 August meeting.

We still await the core print.

While softer CPI this morning may have been expected due to lower oil, the weakness appears broad-based.

After a 2.5% fall from the highs, I am happy to move to the sidelines and reassess.

Trade bias: Took profit on EUR/NOK shorts; now sidelined.
Norway CPI: 2.7% headline.
Versus expectations: 0.4pp below market, 0.5pp below Norges.
Reason: Soft CPI, lower oil, profit-taking.
Risk: Core print or later inflation data changes Norges repricing.