JPM G10 FX Daily

## EUR: Dead Tape, Fed First, MOU Still a Can-Kick

The market has died a bit of a death.

We probably need to get Warsh out of the way and the MOU formally signed before there is much conviction.

The question after that is whether there is a trade other than low-vol drift.

Strategy thinks a message of policy orthodoxy from the new Fed Chair will be enough to put the dollar back in the ascendancy. I am less convinced.

For me, orthodoxy probably needs to be accompanied by a hawkish shift in the 2027 dots to matter.

Otherwise, given Warsh’s apparent dislike of forward guidance and the fact that this is his first meeting, I am not sure he will want to say too much.

The other side of the risk is that he has dovish undertones. If so, the market will go back to questioning the credibility of the Fed as an institution. But I see that as low delta.

### Middle East: Lower Headline Risk, Not Much New to Price

On the Middle East “deal”, emerging details suggest there is little tangible to act on beyond what asset prices have already repriced since the weekend.

It should, in theory, mean lower headline risk for a few weeks — aside from both sides trying to spin it as a win.

But it still has a clear can-kick feel.

### Portfolio: Neutral USD, Crosses Preferred

I do not think Warsh can afford to come across too dovish and be seen as a Trump puppet in his first meeting.

But going in, I do not see much value in being more than dollar neutral.

Crosses remain cleaner.

The only new risk is adding a little to EUR/NOK shorts here. The local NOK story is positive, and with oil probing the lows, the currency looks like it is starting to stabilise into tomorrow’s Norges meeting.

### EUR/USD: Small Core Short Into Fed

There is little to add on EUR itself.

If the Fed is perceived as hawkish, a EUR/USD short sets up well. We are already at peak Middle East optimism, and EUR/USD has not done any meaningful technical damage on the topside.

I have a small core short going into the meeting and would look to add on downside momentum.

Reassess above 1.1700 or if Warsh’s messaging is meaningfully USD-negative.

Trade bias: Small core EUR/USD short; add on downside momentum.

USD stance: Neutral into Warsh.

EUR/NOK: Added a little to shorts.

Key EUR/USD risk level: Above 1.1700.

Catalyst: Warsh Fed meeting.

Risk: Dovish Warsh revives Fed credibility concerns and weakens USD.

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## GBP: Softer CPI, Political Noise, Keep EUR/GBP Length

Details of the MOU leaked overnight, and it looks like most of the climbing down has been done by the US.

That is not a huge surprise.

But the key sticking point — nuclear material — remains unresolved. So it is still difficult to shake the “can-kick” flavour.

All the Warsh previews are now done. Time to see the outcome.

I wonder if it will be as binary as the market thinks. My net USD length has shrunk to negligible levels, so I am going in with an open mind.

### UK CPI: Cooler Headline, Less Cold Details

UK CPI printed cooler than expected for a second straight month.

This time, however, the details were not as soft. Services rebounded more than expected.

Still, headline and core are comfortably below the BoE’s forecasts:

- Headline CPI: 2.8% versus BoE 3.3%

- Core CPI: 2.6% versus BoE 2.8%

Nothing is priced for tomorrow’s BoE meeting anyway.

The Times Shadow MPC voted 5-4 for a hike, which is worth noting. The real question is how the centre of the committee balances the expected rebound in inflation against the weakness developing in the labour market.

We get an update on that tomorrow morning with the LFS.

### Politics: Starmer Digging In

There has been heavy speculation that Starmer may have to relent to the Burnham locomotive, which will gain real steam if Makerfield is won.

But his stubbornness appears absolute:

> STARMER: I WILL FIGHT ANY CONTEST TO OUST ME AS PRIME MINISTER

Stranger things have happened, but this still suggests the Labour succession process will be more drawn out.

Real-money accounts were better GBP sellers yesterday, around 1z.

I am keeping EUR/GBP length.

Levels:

- Trim EUR/GBP into 0.8670/80

- 0.8600 remains support

- Cable range should remain 1.3300/1.3480

Trade bias: Long EUR/GBP.

**Trim zone:** 0.8670/80.

**Support:** 0.8600.

**Cable range:** 1.3300/1.3480.

UK CPI: Softer than expected, but services less benign.

Politics: Starmer resisting; leadership process likely drawn out.

Risk: BoE centre sounds more hawkish than expected.

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## JPY: MoF Keeps Shorts Nervous

Very little to add on JPY.

The “post-presser rush to sell JPY” trade did not work, with the spectre of MoF still apparent.

That said, shorts in the currency are certainly building. Offshore real money was the supply yesterday, around 1z.

I am still toying with the idea of short-term gamma to cover Warsh and the possibility of opportunistic MoF action tonight.

But it also feels like throwing good money after bad.

Levels to watch:

- Topside: 160.725, then 162

- Downside: 50dma at 159.03

- More meaningful support: 158

Trade bias: No strong spot view; short-term gamma still tempting but expensive.

MoF: Keeps JPY shorts cautious.

Positioning: Shorts building.

**Levels:** 160.725/162 topside; 159.03/158 downside.

Risk: Warsh hawkishness triggers USD/JPY spike and MoF response.

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## CHF / CAD: CAD Preferred G10 Short

Not much to add today with focus squarely on Warsh’s first Fed meeting tonight.

CAD remains my preferred G10 short.

Improved risk sentiment after Middle East de-escalation should see CHF underperform, while lower oil should continue to weigh on CAD, mainly on crosses.

CHF is still a medium-term sell.

But CAD should be the biggest underperformer for now.

From a flow perspective:

- Real-money accounts were better CAD sellers yesterday.

- CHF flows were more mixed.

- Systematics were large CHF buyers.

- Real money was selling CHF.

Good luck tonight.

Trade bias: CAD preferred G10 short; CHF still medium-term sell.

CAD driver: Lower oil and RM supply.

CHF driver: Risk-positive backdrop should keep it a funder.

Flow: RM CAD selling; mixed CHF flows.

Risk: Oil rebound supports CAD or risk-off supports CHF.

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## AUD / NZD: Stay Long AUD vs EUR and NZD

Despite the RBA retaining its hawkish bias, AUD failed to make meaningful gains on crosses yesterday.

Still, I remain long.

The impending reopening of the Strait should feed through to:

- Better global growth

- Fewer rate hikes

- Lower inflation pressure

- Support for high-yielding procyclical FX

AUD fits that profile.

I currently express the view against EUR and NZD.

If Warsh gives any encouragement to sell USD tonight, I would add AUD/USD.

That said, I think tonight’s meeting may be far less eventful than some expect.

A close above 1.6483 in EUR/AUD, the 100dma, would be disappointing.

NZ 1Q GDP tonight will also be important.

### MOU Details: Positive for Global Growth, But Not Clean

As usual with classified documents, details of the MOU have leaked.

If accurate, Iran emerges from the conflict in a far healthier position than it entered.

Reportedly:

- Iran can sell oil immediately.

- Iran receives a $300bn economic development plan.

- Sanction relief is granted upon signing the final agreement.

There are still hurdles:

- End to hostilities between Israel and Lebanon.

- Nuclear programme not addressed initially.

- Final agreement still not signed.

So yes, it is a 60-day can-kick.

But taken at face value, it is positive for global growth and reinforces the procyclical outlook.

Once the dust settles — and we are probably at least 60 days away from that — the market may again question the credibility of the US administration. Whether that revives negative USD sentiment is still unclear.

With US exceptionalism calls gaining momentum, the USD outlook is not easy.

Maybe Warsh gives us a better steer tonight.

Trade bias: Long AUD vs EUR and NZD; add AUD/USD only if Warsh supports USD selling.

EUR/AUD risk: Close above 1.6483.

NZD catalyst: 1Q GDP tonight.

Macro: Reopening Strait supports procyclical carry.

Risk: Fed hawkishness or weak China/global growth sentiment.

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## SEK / NOK: NOK Stabilising Despite Oil Damage

The Riksbank will leave rates unchanged this morning. Focus shifts to the rate path and new forecasts.

As discussed yesterday, the key is the year-end forecast, where the FI market has around 23bp priced.

That suggests a high bar for the Riksbank to out-hawk the market.

I will update after the announcement.

### NOK: Price Action Turning More Interesting

NOK price action was interesting yesterday.

Despite Brent falling more than 6%, NOK rallied:

- 0.7% against EUR

- 0.6% against SEK

Technically, EUR/NOK rejected the 100dma around 11.0714, while overbought RSI also helped turn the tide in the short term.

Flows were encouraging:

- Real money and hedge-fund demand outweighed SHF selling.

I remain relatively uninvolved, but I am looking for encouragement from the Riksbank and Norges meetings to re-engage in NOK/SEK longs.

Energy prices could still dominate, but the local story is improving.

Trade bias: Looking to re-engage long NOK/SEK post-meetings.

EUR/NOK: Rejected 100dma near 11.0714.

NOK: Rallied despite Brent down 6%.

Flow: RM/HF NOK demand outweighed SHF selling.

Riksbank: Hold expected; high bar to out-hawk market.

Risk: Further energy weakness overwhelms NOK support.