JPM G10 FX

EUR

We are negotiating with a new regime, but it is still the same old regime. This likely continues until the Strait reopens. The war can end with the Strait still closed, but until there is real clarity, it is hard to justify chasing every headline. The only constant is that the longer this drags on, the greater the impact on global growth.

Adding to the noise, we also have month-end and quarter-end flows in the mix. Given the recent underperformance of U.S. assets, many expect strong dollar buying as part of rebalancing, though the real question is how much of that flow has already been pre-positioned over the past few days.

Cross-yen underperformed yesterday. The move in yields suggests rates positioning may finally have been cleaned up, and the market may now be shifting its focus from inflation to growth. I still cannot fully get on board with the broad dollar-bull case, but the cross trades have worked reasonably well over the last few days: long JPY versus short GBP and CAD. I have trimmed sterling shorts slightly at these levels, but would look to re-sell any rally.

The euro is extending lower. We continued to see real money selling yesterday, though discretionary accounts were better buyers at these levels. Given EUR’s relative outperformance versus rates, growth, and fair value models, I can understand taking some shorts off here. The situation remains fluid, and with a long holiday weekend ahead and payrolls due on Good Friday, liquidity and risk management will be especially tricky. Personally, I am not looking to chase EUR lower here, given the strong support around 1.14, unless the broader backdrop deteriorates meaningfully.

On inflation, Germany saw an energy-related jump ahead of today’s Eurozone print, though core remains more contained, which may lend some support to the ECB’s more patient recent messaging.

GBP

The dollar had a very strong session yesterday, with notable participation from our real money franchise, which was an aggressive buyer of USD (2.5z) for a fifth consecutive session. Given the timing, one has to wonder how much of this was related to month-end / quarter-end rebalancing, especially as signals across both tenors remain strongly supportive of USD.

That said, with this backdrop—and with Trump still trying to find a way to wind down the war—it feels difficult to chase the move here.

I still do not like sterling, and I continue to think the most durable way to express that view is through long EUR/GBP. On flows, real money extended its GBP selling streak to five sessions yesterday (1.5z), while selling from SHFs was offset by DHFs, leaving the broader hedge fund community roughly flat on the day.

This morning’s GDP release was mixed, but it already feels stale given how quickly the geopolitical backdrop is evolving. I am running a reduced core EUR/GBP long here as we approach 0.87 resistance, but I would look to add either on:

• a break above 0.87, or

• a dip toward 0.8650

I am also considering adding option exposure over the coming weeks.

Key levels:

• Cable support: 1.3130

• Resistance above: 1.3320

JPY

Cross-JPY was heavy throughout yesterday, helped by a combination of:

• stronger rhetoric from Japanese officials, and

• a well-bid fixed-income complex.

I do not think the official rhetoric should be chased; rhetoric still means no action yet. The fixed-income move is more interesting, as it may suggest that this crisis is finally beginning to generate demand-destruction concerns, shifting the market’s focus from inflation to growth.

Is that shift finally happening, or is this simply a month-end / quarter-end distortion? It is still difficult to tell, and that uncertainty is keeping this closet JPY bull somewhat cautious—especially after repeated disappointment over recent weeks and months. Still, perhaps that is exactly why it may finally start to work.

Overnight, Tokyo CPI came in broadly in line to slightly soft and should have limited market impact. Katayama was also on the wires, but with nothing meaningfully new.

In yesterday’s flow data:

• offshore real money continued to sell JPY—as it has on nearly every day this month

• SHFs (2.5z) and DHFs (1.75z) were buyers of JPY

In USD/JPY, we are back in the 158–160 range.

In the crosses, the key technical level remains EUR/JPY below its 100-day moving average at 183.01, which has held for the last year but has come under much closer scrutiny since early February.

JOLTS is due later.

CHF

The broader risk-off move yesterday pushed EUR/CHF down to 0.9200.

That said, CHF longs are not my preferred risk-off trade here, for three reasons:

1. the market is already long CHF

2. the SNB remains concerned about excessive FX strength

3. those SNB concerns should provide firm support around 0.9000 in EUR/CHF

Interestingly, we also saw heavy CHF selling across all client sectors yesterday.

Now attention turns to month-end, which can often produce outsized CHF moves. We received Q4 intervention data this morning, but the more relevant release will be March FX reserves next week. For now, the immediate focus is Swiss CPI on Thursday.

I remain neutral CHF for now. There is still very little edge in trying to predict where the Iran war goes from here. That said, if EUR/CHF dips further today, I would be inclined to buy the dip.

AUD / NZD

Overnight, the RBA minutes showed that the Board raised rates because inflation remained persistently high, while also acknowledging that it is impossible to forecast the policy path with confidence given the Middle East conflict.

I would interpret that less as a dovish tilt and more as a simple statement of fact. Before the next Board meeting on May 5, we will have:

• the Q1 inflation print, and

• hopefully a much clearer sense of how the Middle East conflict is evolving.

Today is month-end / quarter-end, and the market assumption is that there will be USD demand. I do not have a strong edge on those flows, but if AUD/USD is sold into the window, I would look to fade that move.

In New Zealand, business confidence fell sharply overnight, dropping from 59.2 to 32.5, the lowest level since July 2024. That should not be especially surprising given the geopolitical backdrop.

AUD/NZD is higher and appears to have found a short-term base around 1.1930 / 1.1940.

CAD

USD/CAD traded to new year-to-date highs this morning, and the desk continues to see strong demand for the pair, primarily from systematic and hedge fund accounts.

As regular readers know, I have been short CAD for several weeks, and recent price action has been encouraging.

Attention now turns to this afternoon’s GDP release. A weaker-than-expected print would reinforce the view that the Canadian economy remains fragile and would likely prompt me to add to CAD shorts.

Positioning still looks relatively light, which suggests there is still room for investors to build short exposure. For now, I expect the loonie to remain an underperformer.