JPM G10 FX Daily

EUR: Deal Optimism Helps, But Payrolls Is the Real Test

We are in peak optimism mode after the latest round of headlines. If the Strait reopens, that is unambiguously good news, even if the deeper issues are simply pushed further down the road.

The question from here is how much more the market can run if confirmation comes. A reasonable guess is oil back toward $80 and roughly 1% lower in DXY. But then we hit the next complication: payrolls tomorrow. If the geopolitical situation is partially resolved, the market may quickly shift back to caring about the data.

Risk was chased a bit intraday yesterday, but I am cautious about carrying too much exposure into payrolls and the weekend. If the positive momentum continues, next week could be about the most beaten-up currencies outperforming — namely EUR and JPY, especially if payrolls is soft.

I have struggled to chase AUD since the RBA, but CHF still looks mispriced if good news continues. Everyone wants carry, and that supports sticking with CHF shorts.

In EM, I probably took back too much EUR/HUF, though the move is now in the area I expected. The desk has traded it well and remains short. I am also looking at USD/ZAR for catch-up, as it remains well off the lows of the year.

EUR got some relief, but less than I would have expected if the market was genuinely very short EUR on the crosses. That may require some digestion. Still, the combination of a deal and weak payrolls would likely force a chase through 1.1800.

I still hold small medium-term EUR topside, but realistically it only works if the dollar continues to soften more broadly. As noted yesterday, if you have been running long EUR/USD, the pivotal support is now clear below current levels.

Franchise flows were USD sellers yesterday, but EUR was nowhere near the top of the demand list.

Trade bias: Mild EUR topside, but only with broader USD weakness.
Bull trigger: Deal confirmation + weak payrolls = chase through 1.1800.
Support: Sub-1.1700 remains pivotal.
Flow note: USD sold broadly, but EUR demand was not especially strong.

GBP: Buy Dips, Watch Leadership Signals

Optimism, deal talk, renewed threats, then doubts — the art of the deal indeed. There has been plenty of chop in optimism levels, but despite both sides projecting strength, developments seem to be moving in a more constructive direction behind the scenes ahead of the US-China summit.

That keeps the short USD bias warranted.

For the UK, local elections are hard to trade directly. Council seats have limited macro relevance and are poor indicators for a general election that is not due until 2029. The key market read-through is whether the results accelerate a potential leadership challenge.

We should hear something from Rayner after the results, as pressure has built inside the party for a statement following recent speculation. Given the media and party noise, it may well come as a statement of support for Starmer.

That would likely be GBP-positive, though it would not be a major surprise.

The more important question is what Starmer himself says, and whether he leaves any opening for Burnham. Burnham would still need to become an MP before any leadership challenge could become practical, which buys Starmer time.

There are no exit polls planned from the major pollsters. Polls close at 10pm BST, and results will come through tomorrow from around 5am BST, continuing into Saturday. Anyone looking for a definitive result before the weekend may be disappointed.

Net flows have quietened sharply this week, but the carry backdrop still makes it hard to be short GBP.

Trade bias: Stay in dip-buying mode.
Cable entry interest: Around 1.3580 today.
Cable range: 1.3450/1.3670.
EUR/GBP range: 0.8600/0.8700.

JPY: 157 Is the Intervention Tripwire

It was a very quiet session overnight, especially given Japanese markets returned from Golden Week. There had been some expectation that local accounts would use current JPY levels to sell, but activity was muted.

Mimura was back on the wires and keen to stress that IMF rules do not limit the number of Japanese interventions. That should not surprise anyone. The only counterpart that really matters for approval is the US, and officials keep telling us communication lines remain open. Bessent will be in Japan next week to meet Takaichi, Katayama and Ueda.

The rest of Mimura’s language remains consistent with the intervention campaign: speculative moves are continuing, and authorities are monitoring closely. Given his recent track record, there is little reason to think they are done.

BoJ current account data should give more clarity on the size of the last three suspected intervention operations, but I am not sure there is much to take from it. Japan has plenty of capacity to continue, in my view.

The 157 handle is increasingly becoming the trigger point for further action. Progress toward that level should be slow. If authorities intervene before 157 trades, the signal would be much stronger that they want a more meaningful USD/JPY move lower.

I am running a very small short USD/JPY and will look to sell 157 and above.

Flows are quiet overall, but SHF have now carved out a five-day JPY buy streak, unsurprising given they were the main holders of JPY shorts.

Trade bias: Small short USD/JPY.
Sell zone: 157.00+.
Intervention trigger: 157 handle.
Technicals:

  • Cloud base: 156.28

  • 200dma: 154.24
    Catalyst: NFP tomorrow.

CHF: Still the Wrong Price on Good News

Swiss FX reserve data this morning does not suggest CHF selling in April. If anything, it points to small buying, which makes sense given EUR/CHF never traded near the March lows.

That does not change the view. CHF still has an asymmetric setup:

  • It is not rallying on risk-off headlines.

  • If it strengthens meaningfully, the SNB looks likely to push back.

  • Its low-yielding status makes it an attractive funder.

  • In a market that wants carry, CHF should underperform.

I remain short CHF versus USD and AUD.

USD/CHF has dug in a little more than hoped, but after the knee-jerk reaction, CHF should be sold on any peace deal as a funder.

Flows were mixed. Hedge funds were decent CHF sellers yesterday, while real money bought CHF after selling for most of April. Systematics also bought francs and added to longs, which could become important if they are forced to turn.

Trade bias: Short CHF versus USD and AUD.
Preferred expression: Buy USD/CHF dips; stay long AUD/CHF.
Risk: USD/JPY downside continues to weigh mechanically on USD/CHF.

AUD/NZD: Stay Long AUD, NZD Optionality Above 0.5920

Today is likely to be driven by Iran’s response to the latest US proposals, while tomorrow’s NFP report should set the tone for the USD.

I remain long AUD/USD, with short-term support now at 0.7220/30.

EUR/AUD rallies toward 1.64/1.65 should be faded. The AUD story still has support from relative rates, carry appetite and improved risk sentiment.

I have not participated in NZD longs for some time, preferring instead to be long AUD/NZD, which has been the right call. But if US data tomorrow supports a weaker USD, then technically NZD/USD longs above 0.5920/30 make sense for those looking for the trade.

Next week’s Q2 inflation expectations report will be important for the RBNZ and therefore for NZD.

Trade bias: Stay long AUD/USD and long AUD versus EUR.
AUD/USD support: 0.7220/30.
EUR/AUD: Fade rallies toward 1.64/1.65.
NZD/USD: Longs make sense above 0.5920/30 if NFP weakens USD.

CAD: Oil Drag Keeps CAD Heavy

Oil moved materially lower yesterday as sentiment improved around a possible Middle East resolution. Risk traded better across the board, but CAD was a notable underperformer, especially on crosses.

That is exactly the expected response given the sharp drop in oil. If a resolution is reached soon, CAD should remain vulnerable on crosses.

That said, the key near-term event is Canadian payrolls tomorrow. Until then, I am not running much risk.

Trade bias: Small short CAD bias on crosses.
Driver: Lower oil on peace-deal optimism.
Catalyst: Canadian payrolls tomorrow.