JPM G10 FX Daily

26 May 2026

## EUR: Still Heavy, Still the Funder

After a few days away, I cannot say I missed this market too much.

Other markets look more excited about the possibility of a Middle East deal this week. FX feels much more lacklustre, especially looking at the dollar. That said, the USD is constrained by competing forces: optimism on de-escalation on one hand, but another week of relative US data outperformance and Waller stepping away from his dovish concerns of the past six months on the other.

That makes the dollar a harder call to fade.

Our volumes and the lack of a clear directional flow theme last week underscore the same point. This is a holiday-shortened week with little data, so once again we are back to hoping for clarity on the conflict and, more specifically, on traffic through the Strait of Hormuz.

Risk-wise, the last few days have been irritating. UK data came in weak across the board and sterling rallied anyway — wonderful. The market was clearly quick to get very short GBP, and with some soothing political commentary plus a long runway to the Makerfield by-election, we are where we are.

I have taken some cable shorts back but am digging in on sterling crosses.

I also took AUD longs off overnight. AUD survived the dip after last week’s employment report, and with the rates market in relaxation mode, I still think AUD is a buy on dips. But it is also now more tradable on rallies, so I prefer to be more tactical.

I am keeping USD/CHF longs. EUR/CHF was surprisingly heavy last week, but fear of higher US rates, some Middle East relaxation, and decent US corporate demand linked to Swiss bond issuance are enough to keep me involved for now.

In EM, I am annoyed not to have been filled on all EUR/HUF offers on last week’s spike. I thought we might extend further. I am taking back the ones I lost at current levels. The structural story is intact, but given the NBH measures, low 350s does feel like the reduce zone.

### EUR macro

European PMI data was weak across the board. That was not a huge surprise, which explains the muted market reaction, but it keeps the EUR-funder thesis going.

The lack of appetite to get excited about any possible Middle East deal in EUR, unlike elsewhere, explains why EUR/USD remains stuck near the low end of the recent range.

JPM’s European economics team cut growth forecasts again after the PMI data. The key question is whether the reopening of the Strait — if and when it comes — marks the trough.

The ECB now has two hikes priced for the remainder of the year. That still feels like it could do more harm than good. The messaging at the next meeting in a couple of weeks will matter.

Resistance remains well defined above the moving averages. A close above 1.1710 is needed to ease pressure on EUR. While below there, a drift toward 1.1500 remains the path of least resistance.

Client feedback from the Continent is turning more bearish, so the rotational EUR dip-buying mentality is not re-emerging yet.

Trade bias: Short EUR / use EUR as funder.

**EUR/USD resistance:** 1.1710 close needed to relieve pressure.

**Downside target:** 1.1500.

EUR/HUF: Reselling rewarded; low 350s is the reduce zone.

Risk: Genuine Middle East deal triggers a broader relief rally and USD setback.

---

## GBP: Weak Data, Strong Pound — Deeply Annoying

After a week away from screens, I at least spared myself a lot of the headline tennis.

Doha remains the centre of attention, and we still have no edge there. Markets certainly look optimistic given where oil is trading. I still harbour a bullish USD bias heading into a very interesting Fed meeting next month, but conviction is painfully low.

Sterling remains frustrating.

Last week’s UK data was soft almost everywhere:

- Employment weakened.

- Prices softened.

- Retail sales disappointed.

- PMIs were especially poor.

- The composite PMI fell 4 points to multi-year lows, implying growth around zero.

That poor activity reading, alongside the big April services CPI miss, led Allan to push his BoE hike call from June to the July MPR meeting. The curve has also removed more than a full hike.

Unfortunately for sterling bears, more centrist talk from Burnham and calmer gilts — ironically helped by the weaker data — triggered short-covering in GBP.

Flows reflected that:

- SHF and RM were decent GBP buyers last week.

- DHF were marginal buyers.

Could there be some Brexit optimism ahead of the July summit? Possibly. But I still think Europe will be very limited in what it allows without a full rejoining.

I remain long EUR/GBP and have added smalls on this dip. I would not like to see a break below 0.8600 in the short term.

There are several MPC speakers this week:

- Lombardelli on Thursday

- Breeden on Thursday

- Bailey on Friday

But there is very little hard data on the calendar for the next few weeks.

Trade bias: Long EUR/GBP; reduced some cable shorts.

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

Line in sand: Do not want to see below 0.8600.

**Cable support:** 1.3450/60, with 200dma at 1.3424.

**Cable resistance:** 1.3540/50.

Risk: GBP short-covering continues if politics stays calm and gilts remain supported.

---

## JPY: Market Edging Back Into Shorts, But MoF Risk Remains

USD/JPY is pretty much where I left it.

The dynamic remains the same: the market is nervously edging back into JPY shorts in the absence of action from the authorities.

Last week:

- JPY was the top sold currency for SHF.

- JPY was second only to CNH in DHF selling.

Given the lack of reaction to the recent softening in oil prices, it is hard not to see JPY shorts continuing to rebuild. But I do not think the MoF is done.

I am sticking with a very modest JPY long, currently expressed through CHF/JPY.

The 159.30/40 zone in USD/JPY continues to prove very stubborn. This is where the first round of intervention started almost a month ago, so the market is understandably cautious.

Overnight headlines noted that Katayama will use the reserve account for utility aid. This is not FEFSA, but I am not ruling out some renewed noise there as policymakers think about funding consumption tax cuts with JGBs already under pressure.

Trade bias: Very modest long JPY.

Preferred expression: Short CHF/JPY.

**USD/JPY key resistance/intervention zone:** 159.30/40.

Risk: If authorities stay quiet, JPY shorts continue to rebuild.

---

## CHF: Still Short, But Losing Conviction

I remain short CHF, but conviction is fading.

The core logic still works:

- CHF has poor carry.

- SNB remains against excessive CHF strength.

- If markets return to carry, CHF should be a preferred funder.

- USD/CHF still has support from higher US rates.

But perhaps we need to get past the initial USD-lower knee-jerk on a US/Iran deal before CHF can properly underperform as a funder.

I still largely hold AUD/CHF longs, but the cross has only been a range trade since initiation, which is not exactly inspiring.

Flows are also not helping. Last week saw continued CHF buying from all sectors:

- Real money bought CHF.

- Hedge funds bought CHF.

- Systematics bought CHF.

That broad buying argues for being lighter.

Trade bias: Short CHF, but reduced conviction.

Preferred structures: USD/CHF and AUD/CHF longs, but lighter.

Problem: AUD/CHF stuck in a range; USD/CHF vulnerable to deal headlines.

Risk: Initial US/Iran deal reaction takes USD/CHF lower before CHF funding resumes.

---

## AUD / NZD: RBNZ Risk Looks Underpriced

The RBNZ meets tonight and is expected to leave rates unchanged at 2.25%, in line with every economist forecast.

New forecasts will be presented, so the OCR profile is the key for market pricing. Current pricing is around:

- 15% chance of a hike tonight

- 64% chance of a July hike

While three hikes for 2026 may look excessive, I think the chance of a hike tonight is higher than 15%, and July looks underpriced.

The RBNZ has a single mandate: price stability.

Inflation is above the target band at 3.1%, has been around current levels for three consecutive quarters, and is unlikely to fall back toward the 2% target soon given the Middle East conflict.

The curveball tonight would be a front-loaded rate hike. If not tonight, then guidance toward July looks highly likely. The RBNZ may also lean on the risk that inflation expectations are becoming unanchored if survey data continues to move higher.

Base case is still patience: hold rates and wait for more information. But risk/reward suggests running a token NZD long into the meeting.

AUD: Took longs off overnight. Still a dip-buy in principle, but more tactical now.

NZD trade bias: Token long into RBNZ.

RBNZ base case: Hold at 2.25%.

Hawkish risk: Hike tonight or strong signal toward July.

Market pricing: Tonight 15%, July 64%.

---

## CAD: Still No Reason To Own It

There is little on today’s calendar, and with no major Middle East developments over the bank holiday, the CAD view is unchanged.

There are still limited reasons to be long CAD:

- Growth is subdued.

- Inflation is subdued.

- The BoC is likely on hold for the foreseeable future.

- CAD should remain vulnerable on crosses.

I maintain short CAD exposure, primarily against AUD longs.

Canadian GDP on Friday will be worth watching, but until then, CAD should trade in line with broader risk sentiment.

Trade bias: Short CAD.

Preferred expression: Long AUD/CAD.

Catalyst: Canadian GDP on Friday.

Risk: AUD softness makes AUD/CAD timing less clean.