JPM G10 FX Daily

EUR: CPI Clears One Hurdle, ECB Next

US inflation was not as hot as feared, though it was not exactly soft either. Headline and core services stickiness still leave some firmness in the data.

I was somewhat surprised the dollar only saw a fleeting selloff. But other forces remain at work:

• US and Iran are still allegedly negotiating while engaging in “self-defence.”

• Tech stocks remain under pressure ahead of major upcoming litmus tests.

• Fed dovish expectations have now largely been washed out ahead of Warsh’s first meeting next week.

On the Fed, there is nothing meaningful left before the meeting. The market now looks fairly reset.

On the war, I still believe larger escalation is undesirable for both sides.

On US equities, I have been asked plenty about flow dynamics: foreign interest in actual IPOs versus the shine coming off US exceptionalism. The answer is not entirely clear, but the broad rotation theme feels less fashionable now.

That leaves me more USD-neutral this week versus bullish last week. The portfolio is largely unchanged from yesterday.

Given the rollercoaster of headlines, I am impressed by the lack of a meaningful oil rally. That keeps me encouraged on the EM side. If gold stabilises, ZAR in particular looks like a great fade at these levels.

On the ECB, the expected message is hawkish on prices. But with current market pricing already there, the only real way to out-hawk is by showing urgency to front-load hikes. That seems possible but not my base case. Lagarde has become an expert communicator over the years and is unlikely to deviate too far from meeting-by-meeting language.

Some popular EUR cross shorts have already been cleaned up a little this week. EUR/USD itself failed below first resistance at 1.1590/1.1610.

A more sanguine ECB message could refocus the market on the downside. But I still view any potential Middle East truce as a risk to piling into EUR shorts down here.

Trade bias: More USD-neutral; no aggressive EUR short before ECB.
EUR/USD first resistance: 1.1590/1.1610.
ECB risk: Hawkish front-loading language would squeeze EUR.
Downside risk: Sanguine ECB refocuses market lower.
Key caveat: Middle East truce could trigger USD selloff / EUR squeeze.

GBP: Still Long EUR/GBP, Still a Patience Trade

CPI was not as hot as some expected, giving FX a little relief and allowing the USD to give back some post-NFP gains.

But big questions remain around Iran and the Fed.

On Iran, there were more worrying signs of escalation after fresh US attacks. I am a little surprised by how muted the market reaction was. It feels like the bigger question is still what kind of Warsh we get next week.

Add tech anxiety into the mix, and it makes sense to reduce outright risk a little, even if still biased toward USD longs.

Sterling remains a sideshow, though it has admittedly traded well over the last few days. I am at a loss to explain why. Our flows have been slightly biased toward GBP buying across tracked sectors, but the amounts are meagre.

I am maintaining EUR/GBP length into the ECB.

The cross is spending a little more time than I would like challenging support around 0.8600/10, but anyone who trades EUR/GBP knows this is a game of patience.

UK GDP data dump is tomorrow.

Levels:

• Cable range: 1.3300/1.3480

• Cable 200dma: 1.34195

• EUR/GBP support: 0.8600/10

• EUR/GBP broader range: 0.8600/0.8700

Trade bias: Long EUR/GBP.
Concern: Too much time near 0.8600/10, but not broken.
Catalyst: UK GDP tomorrow.
Cable: 1.3300/1.3480, 200dma 1.34195.
Risk: ECB disappointment weighs on EUR/GBP.

JPY: Ueda Hospitalized, Uchida Tone Now Matters

Ueda’s hospitalization was yesterday’s main story. He is set to miss the June MPM.

Deputy governors will take over:

• Himino will chair the meeting.

• Uchida will handle the press conference.

• Ueda will provide a statement to the committee in his absence.

There is no chance this changes the actual outcome of the meeting. But there will be interest in how Uchida sounds at the press conference, especially if he needs to sound sufficiently hawkish to offset the more dovish QT development reported by Nikkei earlier this week.

Our strategists view Uchida as a little more dovish.

USD/JPY remains dreadfully quiet, but net progress is being made. It has posted higher highs and higher lows almost every day this month.

Sooner or later, I think things get more disorderly.

Levels:

• Next port of call: 160.725

• Beyond that: 162

I still have no interest in holding a position here. But a quicker move through 162 would significantly raise the probability of bold action.

US PPI comes later.

Trade bias: No position; stay reactive.
USD/JPY: Quiet but grinding higher.
Next level: 160.725.
Major intervention risk: Quick move through 162.
BoJ: Outcome unchanged, but Uchida presser tone matters.

CHF: Short CHF Still Has the Best Asymmetry

US CPI was fairly benign and definitely not hot enough to justify another USD leg higher. That validates taking profit on USD/CHF longs and focusing on XXX/CHF instead.

Obviously, strikes on Iran and Trump’s hawkish rhetoric did send the dollar back higher. But they also kept EUR/CHF bid, given its newer reaction function to risk-off.

Research put out a strong note last night highlighting the asymmetry in CHF shorts, as well as the details around Sunday’s vote.

We remain short CHF. It is a good funder in a reflationary backdrop.

The population-cap vote is not a key pillar of the short CHF thesis, but if approved, it would add another headwind for CHF due to negative growth implications.

Flows continue to support the view:

• Systematics have sold CHF for nine days in a row.

Trade bias: Short CHF versus basket.
Preferred expressions: Long EUR/CHF, AUD/CHF; less USD/CHF after profit-taking.
Vote: Population cap this Sunday; base case not passed, but asymmetric CHF-negative risk.
Flow: Systematics selling CHF for nine straight days.
Risk: Severe escalation restores CHF haven demand.

AUD / NZD: AUD Bought, But Price Action Uninspiring

Yesterday was all about US inflation — until it was not.

A slightly softer-than-expected print initially sent AUD and NZD higher. But with Middle East tensions rising, the USD selloff was short-lived.

As flagged yesterday, I bought AUD after the print. But price action has been uninspiring, and I have already reduced.

I am now looking to US PPI this afternoon for further encouragement — not a sentence I write often.

Overnight, Australian consumer inflation expectations fell one tenth from 5.6% to 5.5%, but that remains elevated and does nothing to calm RBA concerns around inflation.

The ECB should raise rates by 25bp today, with focus on the tone.

With around 70bp priced for the rest of the year, the bar is high for an overtly hawkish outcome, especially if Lagarde retains meeting-by-meeting language.

If that is the case, the plan is to sell EUR/AUD as it approaches the 100dma near 1.6511.

The hawkish ECB outcome would be any indication that another hike is possible in July. But even then, hiking into weak growth is not supportive in my view, and I would look to fade the EUR rally.

AUD bias: Tentatively constructive, but reduced after poor price action.
Catalyst: US PPI.
EUR/AUD plan: Sell near 100dma around 1.6511 if ECB underwhelms or rally fades.
ECB pricing: Around 70bp for rest of year.
Risk: Hot PPI / risk-off hurts AUD again.

CAD: BoC Neutral, CAD Bearish Bias Unchanged

The BoC held rates at 2.25% as expected.

Governor Macklem struck a notably neutral tone. Inflation risks have risen, helped by higher oil prices, but growth remains weak and labour-market slack persists.

The Governing Council characterised risks as broadly balanced and remains firmly data-dependent, with either cuts or hikes possible depending on how inflation and growth evolve.

My view remains that core inflation around 2%, alongside a soft growth backdrop, keeps the BoC on hold for the foreseeable future.

So the bearish CAD bias remains.

As expected, the meeting had little impact on the currency. Middle East escalation remains the dominant macro narrative.

Flows were surprising:

• Local RM and systematic accounts sold USD/CAD.

• Hedge funds were notable USD/CAD buyers.

Trade bias: Bearish CAD medium term.
BoC: Held 2.25%, neutral tone.
Macro view: Soft growth and core inflation near 2% keep BoC on hold.
Flow note: RM/systematics sold USD/CAD; hedge funds bought.
Risk: Oil rally becomes meaningful enough to support CAD.

SEK / NOK: NOK Longs Working, RNS Next

In yesterday’s commentary, I went long NOK after the inflation data.

That trade was helped by:

• Softer-than-expected US CPI.

• Escalation in Middle East tensions.

• An oil bounce.

NOK strengthened around 1% on the day.

EUR/NOK failed to close below the 50dma near 10.9127, but NOK/SEK continues to bounce off its own 50dma near 0.9954.

Next up is the RNS at 09:00, the final important release ahead of next week’s Norges Bank meeting.

Expectations are for a weaker growth outlook due to the Middle East conflict. But the important details will be:

• Capacity utilisation

• Labour constraints

• Pricing intentions

I retain NOK longs initiated yesterday and will add if this morning’s release gives further encouragement.

NOK/SEK also received support from yesterday’s monthly mutual funds data, which showed net investment into US assets for the first time since December 2024. These flows have historically been a headwind for stronger SEK. If this marks a reassessment of the recent repatriation/rotation narrative, then SEK’s role as a funder points to further weakness.

Trade bias: Long NOK versus EUR and SEK.
EUR/NOK: Watch 50dma near 10.9127.
NOK/SEK: Bouncing from 50dma near 0.9954.
Next catalyst: RNS at 09:00.
Add trigger: Supportive capacity/labour/pricing details.
SEK angle: US asset outflows/reversal of repatriation narrative can weigh on SEK.