Key points:

  • USD: The Fed may find it hard to meet market’s dovish expectations
  • JPY: Volatility risks remain high with Fed-BOJ policy divergence in focus
  • GBP: Overbought positioning could be a risk going into close-call BOE meeting
  • AUD: Any hints of hot inflation can spur further RBA rate hike bets
  • CNH: Economic and tariff risks continue to escalate
Carry trading saw unwinding risks develop last week which sent Japanese yen higher, taking other funding currencies such as Swiss franc and Chinese yuan with it while high yielders Aussie and kiwi underperformed.
Our FX Scorecard saw Japanese yen and Swiss franc momentum surge higher than sterling, but turning negative again in the last two days. Momentum is NOK seems to be the gaining, followed by SEK.
The CFTC positioning data for the week of 23 July saw speculators cut the long positioning in US dollar further. Short positioning in JPY was covered significantly, as was in CHF. Longs were added to EUR and GBP, while net positioning in AUD turned to a short.

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Recent FX articles and podcasts:

  • 26 Jul: US PCE Preview: Key to Fed’s Rate Cuts
  • 25 Jul: Carry Unwinding in Japanese Yen: The Current Dynamics and Global Implications
  • 23 Jul: Bank of Canada Preview: More Cuts on the Horizon
  • 16 Jul: JPY: Trump Trade Could Bring More Weakness
  • 11 Jul: AUD and GBP: Potential winners of cyclical US dollar weakness
  • 3 Jul: Yuan vs. Yen vs. Franc: Shifting Carry Trade Strategies
  • 2 Jul: Quarterly Outlook: Risk-on currencies to surge against havens
  • 26 Jun: AUD, CAD: Inflation Rising, Can Central Banks Stay on Pause?
  • 21 Jun: JPY: Three-Way Pressure Piling Up
  • 20 Jun: CNH: China Authorities Loosening their Grip, But Devaluation Unlikely
  • 19 Jun: CHF: Temporary Haven Flows Unlikely to Fuel SNB Rate Cut
  • 18 Jun: GBP: UK CPI Details and Elections Will Keep BOE on Hold
  • 13 Jun: BOJ Preview: Tapering and Rate Hike Talk Not Enough to Boost JPY
  • 10 Jun: EUR: Election jitters and ECB rate cut add to downside pressures

Recent Macro articles and podcasts:

  • 25 Jul: Equity Market Correction: How to Position for Turbulence?
  • 24 Jul: Powell Put at Play: Rotation, Yen and Treasuries
  • 22 Jul: Biden Out, Harris In: Markets Reassess US Presidential Race and the Trump Trade
  • 8 Jul: Macro Podcast: What a French election upset means for the Euro
  • 4 Jul: Special Podcast: Quarterly Outlook - Sandcastle economics
  • 1 Jul: Macro Podcast: Politics are taking over macro
  • 28 Jun: UK Elections: Markets May Be Too Complacent
  • 24 Jun: Macro Podcast: Is it time to diversify your portfolio?
  • 12 Jun: France Election Turmoil: European Equities Amidst the Upheaval
  • 11 Jun: US CPI and Fed Previews: Delays, but Dovish
  • 10 Jun: Macro Podcast: Nonfarm payroll shatters expectations - how will the Fed react?
  • 3 Jun: Macro Podcast: It is a rate cut week   

Weekly FX Chartbooks:

  • 22 Jul: Weekly FX Chartbook: Election Volatility and Tech Earnings Take Centre Stage
  • 15 Jul: Weekly FX Chartbook: September Rate Cuts and the Rising Trump Trade
  • 8 Jul: Weekly FX Chartbook: Focus Shifting Back to Rate Cuts
  • 1 Jul: Weekly FX Chartbook: Politics Still the Key Theme in Markets 

    FX 101 Series:

    • 15 May: Understanding carry trades in the forex market
    • 19 Apr: Using FX for portfolio diversification
    • 28 Feb: Navigating Japanese equities: Strategies for hedging JPY exposure
    • 8 Feb: FX 101: USD Smile and portfolio impacts from King Dollar