JPM G10 FX Daily

## EUR: CPI and ECB Before Taking a Strong View

Tech gyrations, Middle East skirmishes and short-term market reactions are all creating noise.

The tech wobble feels more related to upcoming IPOs than something deeper. On the Middle East, the speed with which Israel was scolded, the unclear circumstances around the downed Apache, and the fact that retaliation was described as self-defence and ended quickly all suggest limited desire for real escalation.

So, cutting through the noise, we are not far from the environment described yesterday.

The market already expects a hot US inflation print today. That means the bar is higher for another meaningful leg higher in the dollar, especially after Friday’s rally and the parallel move in rates. That does not mean the USD has to retrace much, but the easy upside has likely been reduced.

Positioning has shifted from overall long dollars last week to closer to neutral over the last few sessions.

The last bullish USD position is long USD/CHF, though cash exposure has been reduced and the topside structure remains. That has worked well. CAD was taken off last Friday, and AUD shorts were cut yesterday morning.

EM felt like it had absorbed the pain yesterday morning until the afternoon equity selloff, but I am sticking with it.

I am fairly happy with current positions and would not chase a mildly hot CPI print, especially with oil struggling to rally over recent sessions. On a soft number, despite the annoyance of having been short AUD on payrolls, AUD has now corrected nicely and may be worth flipping back long.

EUR has behaved in typical fashion. Before last Friday, it chopped around in an annoying tight range, then briefly raised excitement levels only to resume the same price action on a new big figure.

There has been a decent squeeze in some EUR crosses before the ECB, which makes sense given positioning. Technically, EUR/USD could not reach the first area of interest for rally sellers, so if you are bearish, standing back has done no damage.

I am still waiting for US CPI and the ECB to pass before embracing much of a view in EUR. I have expressed USD bullishness elsewhere. While I do not necessarily want to be long EUR, I do not discount seeing better levels and better risk/reward to set up shorts.

Trade bias: Neutral EUR until CPI and ECB clear.

USD bias: Reduced from long to more neutral.

Potential reaction: Mildly hot CPI may not be enough to chase USD higher.

EUR: Better sell levels may come; no need to force it here.

Risk: Soft CPI squeezes EUR/USD and high beta.

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## GBP: Tech Anxiety Enters the Mix

Markets are getting heated.

The Iran back-and-forth is giving way to a larger force: tech anxiety. The market is bearing down on a massive IPO pipeline, starting with SpaceX on Friday.

That raises plenty of questions for the USD. This risk-off episode has pushed fixed income higher, unlike the Iran flare-ups, and chips away at US exceptionalism.

The answer for USD is a huge “it depends.”

- Hedging dynamics from a lower US equity market should support the greenback.

- Outright position reduction would work the other way.

I would favour the former dynamic on a TINA basis, but that may not prevent some giveback through the sentiment channel in the meantime.

Add a much-anticipated US CPI print today and a rate curve already pricing a hawkish profile, and USD conviction is understandably lower.

Sterling remains far less interesting.

There were headlines that Starmer is telling ministers to quit if they plan to back Burnham as he fortifies his position ahead of the impending leadership election. Makerfield looks red and done, with Kalshi around 88%.

I still like being long EUR/GBP because:

- The market has washed out a lot of GBP shorts.

- That is especially true for SHF in our franchise.

- UK EASI has recently fallen from grace.

- EUR/GBP is at the lower end of the 0.8600/0.8700 range.

Trade bias: Long EUR/GBP.

**EUR/GBP range:** 0.8600/0.8700.

Political backdrop: Makerfield likely red; leadership risk building.

USD backdrop: CPI and tech anxiety lower conviction.

Risk: Soft US CPI lifts cable and drags EUR/GBP lower mechanically.

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## JPY: Even the Perfect Backdrop Did Not Help

Lower stocks, lower oil, lower yields. You would think JPY might have had a chance yesterday.

Incorrect.

We saw significant JPY selling from all corners:

- DHF sold 2.5z.

- SHF sold 1z.

- RM sold 1z.

It is hard to rationalise beyond the idea that the market increasingly believes 160 is tacitly acceptable to MoF.

Now US CPI steps up.

The usual questions follow:

- Would MoF chase a downside CPI miss?

- Could an overtly hot print cajole them into action if USD/JPY becomes disorderly topside?

For now, we remain sidelined and prefer to stay reactive.

Levels:

- Previous high: 160.725

- Multi-decade highs: around 162

Trade bias: Sidelined / reactive.

**USD/JPY key level:** 160.725 previous high.

**Major focus:** 162 multi-decade highs.

Flow signal: Broad JPY selling despite supportive macro backdrop.

Risk: Hot CPI drives disorderly topside and forces MoF response.

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## CHF: Took USD/CHF Profit, Still Short CHF Elsewhere

It was quiet until tech stocks suddenly sold off and Trump announced retaliatory attacks for the Apache downing.

USD/CHF traded up to 0.7995 overnight, while EUR/CHF reached 0.9227.

Focus now turns to US CPI for short-term USD direction.

Given the decent move higher in USD/CHF and a less bullish USD view at this point — CPI is expected to be hot, and the bar seems high for Warsh to sound overly hawkish at the FOMC — I have taken profit on USD/CHF.

I have rotated into EUR/CHF and AUD/CHF longs.

The CHF bearish view remains intact. This weekend brings the vote around capping the population at 10 million. Base case is that it does not pass, but it is worth running short CHF into it given the negative growth implications if it does.

Flows also support the view:

- Systematics have sold CHF for eight consecutive days.

Trade bias: Short CHF.

Taken profit: USD/CHF after move to 0.7995.

Current expressions: Long EUR/CHF and AUD/CHF.

Political risk: Population-cap vote this weekend.

Flow note: Systematics selling CHF for eight straight days.

Risk: Risk-off revives CHF haven demand before vote.

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## AUD / NZD: AUD Long Worth Revisiting on Benign CPI

With robust US data, no end to the Middle East conflict, equities under pressure and VIX on a 20 handle, it makes sense that AUD has underperformed recently.

AUD has been investors’ preferred G10 play, so deleveraging has hit it visibly across crosses.

The broader view remains that AUD should perform well once the dust settles, supported by:

- Resilient global growth.

- Carry.

- Terms of trade.

But in a world where risk is under pressure, AUD will struggle. Even hiding in crosses has been testing.

AUD/USD has now closed below the 50dma and 100dma, which is technically bearish.

That said, after a 3.5% pullback from the highs, if US inflation is benign, AUD longs are worth re-examining.

Trade bias: Neutral for now; revisit AUD longs on benign CPI.

AUD/USD technicals: Closed below 50dma and 100dma.

Correction: Around 3.5% from highs.

Bullish medium-term case: Growth, carry and terms of trade.

Risk: Hot CPI / equity pressure extends deleveraging.

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## CAD: BoC Hold, Bearish Medium Term

The Bank of Canada is widely expected to leave rates unchanged today.

Since this is a non-MPR meeting, the key will be the tone of the press conference.

May’s strong employment report could bring a slightly more hawkish tilt. But the broader backdrop still leaves limited scope for the BoC to hike this year:

- Canada entered technical recession in Q1.

- Core CPI fell to a five-year low in April.

- Oil prices have declined since the last meeting.

- Growth and inflation remain subdued.

Overall, the decision should have limited impact on CAD.

The medium-term bearish CAD view remains unchanged.

Trade bias: Bearish CAD medium term.

BoC: Expected hold today.

Key focus: Press conference tone.

Why bearish: Recession, low core CPI, softer oil, weak growth profile.

Risk: BoC sounds more hawkish than expected.

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## SEK / NOK: Rebuilding NOK, But Keeping Size Sociable

With equities and oil under pressure yesterday, NOK underperformed. SEK was not immune to the risk selloff either.

This morning, Norwegian inflation printed at 3.4% YoY, above market expectations and, more importantly, one tenth above the Norges Bank forecast of 3.3%.

This is not a smoking gun for an aggressive NOK rally, though EUR/NOK did fall 0.5% after the release. But it does little to change Norges Bank’s hawkish stance, which should support NOK.

There are still bigger themes dominating short-term price action:

- Positioning.

- Equity pressure.

- Oil failing to rally meaningfully despite Middle East escalation.

That argues for using NOK crosses to insulate somewhat from broader USD and risk noise.

I used the rally toward 11.00 in EUR/NOK to buy one-month downside. I also bought NOK against EUR and SEK in cash after the CPI print.

Technically, I would like to see a reversal back through the 50dma near 10.9190. EUR/NOK has now rallied for 13 consecutive days, with RSI approaching overbought, so the cross is due a pullback.

Full disclosure: sizing is sociable for now. This afternoon’s US CPI could still matter for high beta.

Swedish monthly GDP rebounded, though the prior month was revised lower. The data is noisy and has largely been ignored. Household consumption, due at 07:00, appears delayed.

Trade bias: Modest long NOK versus EUR and SEK.

EUR/NOK: Bought 1m downside near 11.00.

Key technical: Reversal through 50dma near 10.9190.

NOK support: Norway CPI at 3.4% YoY, above Norges Bank forecast.

Risk: Equity selloff extends and drags NOK lower.