G10 FX Strategy: Our Latest Views

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G10 FX Strategy: Our Latest Views

gain, and we will be watching the US policymaking process closely, particularly as it relates to

the composition of the FOMC, as this could be a key catalyst for a return to investors pricing in greater risk premium in

the USD and favoring other peer reserve currencies like the EUR.

JPY Our view: Neutral Risk skew: Neutral

Watch: Retail Sales, BoJ Tankan, Weekly MoF data

We remain neutral on JPY. USD/JPY has tested the highest level since 2024, led by broad USD strength. However, the

fear for the potential FX intervention might prevent USD/JPY from breaking higher above 162.00. Meanwhile, the

downside for USD/JPY should also be limited given hawkish Fed communication with regards to the inflation. We

don’t see meaningful decline in USD/JPY until market start to price in sharper Fed rate cut path in the event of

potential risk reduction.

GBP Our view: Bearish Risk skew: Bearish

Watch: GDP Revision, House Prices, PMI Revisions

We are bearish on GBP, and recommend shorts versus EUR and AUD. We also think that a continued momentum-

driven rally in the USD could see GBP/USD fall more too. The key near-term premise is that there is ample scope for

investors to add more risk premium in the currency as they re-focus on the UK fiscal and political outlook and seek to

hedge risks around these themes. More medium term, we think investors continue to underprice the likely risk of a

dovish BoE pivot, particularly given that energy prices have been falling perhaps more than investors initially

anticipated. A disinflationary impulse into the UK may give the BoE scope to begin thinking about restarting its rate

normalization process, which would prove a dovish surprise relative to market pricing and would weigh on GBP's carry,