Macro Trade Recommendations

Research evidence excerpt

Macro Trade Recommendations

, which

keeps us on the sidelines.

• NZD is running rich into seasonal August weakness.

• New trades: None.

• Closed trades: Take-profit on long GBP vs CHF, SEK,

EUR.

• Existing trades: Long USD vs EUR, SEK, NZD, CAD,

CHF; short CHF vs USD, AUD, HUF; long AUD/SEK;

long EUR/SEK; long NOK/SEK in options; short

CAD/MXN (G10-funded EM carry).

Source: J.P. Morgan

We hold USD longs in part because of the quick resur-

Our patience with dollar longs was rewarded this week gence of bullish risks around the July FOMC. Dissents

and we hold the position into the Fed next week. It has will determine whether USD rallies on the day. It wasn’t

been a perfect storm for USD in recent sessions – the Fed long ago that the soft CPI release seemingly killed the risk

continues to get repriced, energy is bid providing renewed premium for a July hike. But it’s back to ~8-9bps and sup-

ToT support, and global financial conditions tightening with porting the dollar in-kind (Figure 2USDhaslargelytrackednear-termFedratespricingrecently), in part reflecting: 1) less

higher rates has pressured risk assets, further supporting the disinflation outside of CPI (eg core PCE running 20-22bps m/

dollar (Figure 1USDstrengthhaspersisted,evenasnominalratespreadshavetechnicalymovedagainstit,sugestingriskpremiumsuport). We are thus comfortable holding the dollar m); 2) still-hawkish Fedspeak; and 3) some labor data like

long as the Iran conflict continues to escalate, and as bullish claims still printing quite strongly (against a backdrop of

risks have emerged ahead of next week’s FOMC meeting higher energy prices and rates). With some hawkish speeches

(more below and in the Outlook). For the time being, we stick in hand, it stands to reason that dissents could emerge given