Institutional FX Insights: JPMorgan Trading Desk Views 5/5/26
JPM G10 FX Daily
EUR: Still a Funder, Still Heavy
The relief of one less day of headline-watching thanks to the UK holiday is welcome, but markets remain stuck in a familiar pattern: go into the weekend one way, come out the other.
Middle East headlines continue to deteriorate, though the timing and path of any resolution remain highly uncertain as the back-and-forth over Hormuz continues. Last week’s broad USD weakness was distorted by month-end flows and yen-related price action, so some correction was always likely. Add in geopolitical escalation, resilient US data and a modestly hawkish Fed impulse, and the USD bounce makes sense.
That said, I still lean marginally USD bearish, assuming the worst-case scenario — a return to full-blown hostilities — does not materialise. But it is easy to understand why EUR/USD is struggling to move meaningfully lower or higher.
For now, I am not running much beyond trading around the short EUR/HUF position.
EUR remains stuck. The negative growth implications from higher energy prices continue to weigh, while the return of tariff headlines — with Trump threatening higher auto tariffs — adds another headwind. Rallies look short-lived as the list of problems grows.
EUR also remains the market’s funder of choice. A close below the 200dma at 1.1677 — tested but not broken last week — and the intraweek lows around 1.1655 would likely trigger fresh selling.
Trade bias: Neutral spot EUR/USD for now, but see merit in EUR cross shorts. Positioning is already there, so chasing requires care.
GBP: Political Risk Builds, But Data Still Supports
Sentiment has darkened over the long weekend. US attempts to unilaterally reopen the Strait have been met with escalation, including attacks on UAE infrastructure and a higher energy complex.
That makes it difficult to separate month-end USD effects from the broader Middle East-driven swings. As a result, I am shelving plans to re-buy cable for now.
UK local elections on Thursday are the key domestic risk. They could prove another blow to Starmer, with reports suggesting up to 80% of Labour council seats up for grabs may be at risk amid the increasingly fragmented UK political landscape, especially the rise of Reform and the Greens.
Odds of Starmer leaving by year-end remain just above two-thirds, but the timing of any leadership challenge is difficult to call, particularly against the backdrop of war headlines and the UK cost-of-living squeeze.
Recent UK data has been solid, and there has been notable short covering from the DHF sector over the last couple of weeks. That argues against getting too bearish GBP here.
Trade bias: Turn more neutral GBP.
Levels:
Cable support: 1.3450
Cable resistance: 1.3610
EUR/GBP range: 0.8600/0.8700
Would look to re-buy cable only on a deeper move toward 1.3450, unless the political backdrop deteriorates materially.
JPY: Intervention Risk Caps the Trade
JPY has seen further spikes, but there is still little confirmation from the usual BoJ current account data.
Market chatter is focused on IMF rules, which suggest that up to three episodes of FX intervention within six months can still be consistent with a free-floating regime. Newswires also quoted an MoF official saying that three days of intervention count as a single market operation.
So, in theory, Japan may have completed only the first intervention “episode.” But even if that is true, it is unclear whether this would stop them from acting again quickly. It is also unclear how much weight the Japanese authorities would place on the strict IMF definition.
What matters more for the market is price action. The last few sessions have created a clear pressure point around 157.30/35. A break above that area could see USD/JPY gap higher.
Trade bias: Avoid running too much short USD/JPY here. Leave room to sell closer to 159.
CHF: Core CPI Keeps Franc as a Funder
Swiss headline inflation has risen, driven by energy costs, but the more important detail is that there has been no spillover into core inflation. Core CPI came in softer than expected at 0.3%.
Schlegel had already flagged the likely rise in headline inflation two weeks ago and suggested any jump should be short-lived. Combined with soft core inflation, this should keep CHF firmly in funder territory.
I remain happy to be short CHF, primarily against the USD. Last week’s USD/CHF move lower was used to add longs.
With Middle East tensions re-escalating, the dollar is trading higher, but the franc continues to show limited safe-haven response to risk-off headlines. That is an important shift.
Trade bias: Long USD/CHF.
Target: Move back toward the 200dma at 0.7932.
Flows: Systematics remain mixed despite decent CHF longs, while real money continues to sell CHF.
AUD: RBA Dovish Hike, But Carry Still Matters
The RBA hiked rates as expected by an 8-1 vote, taking the cash rate to 4.35%. The message was slightly dovish — essentially “we can wait and see” — and yields moved 4-5bp lower.
AUD has weakened on the session, but I retain AUD longs on crosses. Once the dust settles, today’s meeting is still a reminder that Australia remains at the top of the G10 interest-rate table.
Yes, the RBA has signalled patience after three consecutive hikes, but it remains concerned about inflation expectations becoming embedded. Today’s decision does not rule out further hikes.
The widening in nominal rates continues to support the medium-term AUD story. Hedging, repatriation and investment flows should remain constructive.
Trade bias: Stay long AUD, mainly versus EUR.
EUR/AUD: Use any rally toward a 1.64 handle to add shorts.
AUD/NZD: Buy dips remains the bias, but tonight’s NZ employment data is important for short-term direction.
CAD: Keep It Light Into Labour Data
CAD remains difficult to trade with conviction while risk sentiment is being dominated by Middle East headlines.
I still expect CAD to modestly underperform on crosses, but positions should stay reduced given the macro uncertainty and energy-linked volatility.
Canada PMIs are due this afternoon, but the main event is labour data later this week.
Trade bias: Mildly bearish CAD on crosses, but reduced size into labour data.
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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!