Institutional FX Insights: JPMorgan Trading Desk Views 13/5/26
JPM G10 FX Daily
EUR: Nothing to Do Until the Range Breaks
There is very little new news. At least UK politics made yesterday go a bit quicker.
More broadly, it remains hard to get excited about FX without some sort of conclusion in the Middle East. With Trump — and his now extensive corporate giant entourage — in Beijing for the rest of the week, the market will stay firmly in headline-watching mode.
It is hard to see the US and China coming away without at least some semi-positive understanding, but whether that is genuinely market-moving is much less clear.
Inflation came and went broadly as expected. Data is simply not in the driving seat right now. At some point, if the Middle East situation continues to drag, the market will need to focus on the growth implications. But we are not there yet.
Risk-wise, I remain short CHF. I also added some token cable shorts, like the rest of the world, but I am reluctant to go too far. If Burnham looks like he is properly coming to the party, that could continue to rile the long end, but we have seen repeatedly that if UK politics goes quiet for a while, sterling tends to climb the wall of worry.
I bought a little AUD on the micro dip against those shorts, mostly to balance out the dollar exposure. In EM, I am staying patient in EUR/HUF and hoping for more of a positioning cleanse before rebuilding.
EUR/USD is back toward the bottom of the tight range. ZEW actually bounced a touch, but the only correct call yesterday was that nobody cared.
Overall, the market remains short EUR on the crosses and seems comfortable with that positioning. Unless geopolitics changes drastically, it is hard to see that view being seriously tested.
Trade bias: Neutral EUR/USD, bearish EUR on crosses.
Range: 1.1670/1.1800.
Engagement trigger: Clean break of either side.
Better trade: Stay short CHF; wait to rebuild EUR/HUF shorts after a cleaner squeeze.
GBP: Starmer Survives the First Wave, But the Circus Continues
West’s impatience has plunged Labour into a circus. The party was simply not ready to move forward, and Starmer appears to know it.
On the face of it, he has quelled the rebellion for now. The latest numbers suggest around 141 MPs support Starmer, while 91 are calling for change. Yes, that is above the broad threshold, but the key point is that rebels need to line up behind one challenger to trigger the mechanism to replace him.
The odds of Starmer not being PM by year-end have fallen back to around 65/70% on Polymarket/Kalshi.
Where do we go from here?
Today brings the King’s Speech, with the associated ceremony likely stretching into the early afternoon. That should keep politics quieter this morning out of respect.
Streeting is due to meet Starmer beforehand. After reports late yesterday that he failed to gather enough support to justify breaking his promise not to trigger a leadership challenge, the meeting is expected to look like something of a climbdown. But we likely will not hear anything substantial until after the King’s Speech wraps up.
The Burnham problem
Burnham remains the favourite to eventually take the throne, but the hurdles are significant:
He needs an MP with a sufficiently safe seat to step down.
Labour must avoid by-election embarrassment.
The NEC would need to allow him to run.
That by-election would take roughly 4-8 weeks to organise.
He would then need to win the seat.
Only after that could he challenge Starmer.
That is a long and messy path.
From a market perspective, the issue is not simply whether Starmer survives, but whether Labour drifts toward a more fiscally loose, left-leaning policy mix. Burnham keeps that risk alive. Streeting would likely be the cleaner market outcome.
I have added small cable shorts, but I do not want to overstay the trade. If politics quietens, sterling can recover quickly, especially in a carry-friendly backdrop.
Trade bias: Tactical GBP downside, but do not chase aggressively.
Cable support: 1.3390/1.3450 remains key.
Moving averages: 50dma and 200dma clustered around 1.3426/28.
EUR/GBP resistance: 0.8680, then 0.8750.
Key risk: Burnham path becomes credible and long-end gilts remain under pressure.
JPY: Waiting for the 158 Test
JPY markets were very quiet overnight as USD/JPY tiptoed toward the post-intervention high at 157.93.
The Bessent meetings delivered little of substance, which should not surprise anyone. Some tried to get excited about Katayama saying that Bessent “touted US-Japan forex ties more than usual,” but that does not change the bigger picture. We still look far from joint intervention.
US CPI came in a touch hotter than expected, pushing US fixed income to fresh 10-month lows and bringing hikes into the Fed curve. That has helped the broader dollar, especially against G3, but the moves remain glacial given the background uncertainty around Iran and the China summit.
I remain small short USD/JPY, but the reality is that we probably need a foray into 158 to trigger a meaningful MoF response. If they do not react there, then 160 becomes a real risk relatively quickly.
Technically, USD/JPY closed above the 100dma at 157.38 last night. The top of the cloud is 158.82.
Flows remain minimal. US PPI is due later.
Trade bias: Small short USD/JPY.
Add zone: Into 158.
MoF trigger zone: 158/158.80.
If no reaction: 160 comes into view.
Key levels:
Post-intervention high: 157.93
100dma: 157.38
Cloud top: 158.82
CHF: Higher Yields Keep CHF as the Funder
US core CPI printed 0.376% m/m on an unrounded basis — technically on the lower side of a 0.4% number, but still sticky.
The market seems eager to downplay elevated inflation. There is an argument that this is transitory, but it is difficult to make that argument with real conviction while the Strait of Hormuz still appears far from reopening.
Ultimately, a higher-yield environment reinforces the case for using CHF to fund longs in AUD and USD.
The thesis remains unchanged:
CHF does not rally cleanly on risk-off.
The SNB is vocally uncomfortable with excessive CHF strength.
Higher global yields make low-yielding CHF an attractive funder.
Carry remains supported if global escalation is avoided.
I remain short CHF versus AUD and USD.
Trade bias: Short CHF.
USD/CHF support: 0.7750/75.
AUD/CHF target: YTD highs near 0.5675.
Flows: Fast-money CHF supply was only partially absorbed by real-money demand.
AUD/NZD/CAD: AUD/CAD Still the Cleaner Expression
US CPI ticked higher yesterday, but the market reaction was muted. Risk sentiment remains dominated by Middle East developments rather than the data calendar.
Overnight, Australia’s wage price index printed in line with consensus at +0.8% q/q. Most of the increase came from the private sector, while public-sector wage growth decelerated to 0.5% q/q.
That does not change the AUD view. We continue to run long AUD/CAD, and yesterday’s move higher in the cross was encouraging.
The CAD leg remains the cleaner short:
Canadian labour data was weak.
Employment fell 18k.
Unemployment rose to 6.9%.
The data contrasts with a still-solid US labour market.
CAD supply from real money was visible on the desk.
If Middle East tensions resolve, AUD/CAD should benefit from improved risk appetite and softer oil risk premia. If growth divergence remains the focus, CAD should still underperform.
Not much on the calendar today. Focus increasingly shifts to the upcoming Xi/Trump meetings.
Trade bias: Stay long AUD/CAD.
AUD support: In-line wages and carry demand.
CAD drag: Weak labour data and real-money supply.
Catalyst: Xi/Trump headlines; Middle East developments.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!