Institutional FX Insights: JPMorgan Trading Desk Views 20/3/26
JPM G10 FX
Where do I start? First of all, resting liquidity has all but disappeared and we are still trading a random, headline-driven tape where conviction can evaporate in minutes. Rather than pretend there is some deep edge in trying to map every central bank nuance onto this market, the broader point is that geopolitics, energy, and second-round inflation effects are doing most of the heavy lifting. Powell is probably right that it is still too early to know the full economic consequences of the Middle East conflict, but the market is already trying to price them anyway — and not especially cleanly. The result is erratic price action, unstable correlations, and repeated reversals that feel more flow- and position-driven than fundamentally pure.
What stood out was that even with oil off the extremes, the market is increasingly talking about demand destruction, tighter financial conditions, and a much nastier mix of higher inflation and lower growth. That is not a comfortable backdrop for risk, and it is why I still think USD and JPY remain the cleaner defensive expressions, even if intraday moves continue to look completely irrational at times. Outside of that, I would be wary of overcommitting to any broad cyclical rebound story just yet. Close to home in risk, modest in size, and still respecting the fact that headlines are driving more than models right now.
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## EUR
The ECB was clearly more inflation-aware, but I am not sure that is a straightforward positive for the euro when the same story also implies weaker growth and more vulnerability to elevated energy costs. Europe remains one of the places where the inflation shock and growth shock are arriving together, and that is not an especially attractive currency mix. Yes, the market can push harder on ECB repricing, but unless the geopolitical backdrop calms meaningfully, I still struggle to see a clean sustained EUR bullish story emerging from that alone. The rates signal may sound firmer, but the macro backdrop remains messy.
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## GBP
The BoE was hawkish, no question, and the front-end repriced accordingly. But once again, a more aggressive short-end move is not automatically bullish for the currency if the market is simultaneously starting to price a more difficult growth path. That bear flattening dynamic matters. Sterling can still squeeze higher in the short term, especially if positioning is wrong-footed, but I am less interested in chasing it when the move is being driven by a mix of inflation anxiety and deteriorating growth expectations. If cable rallies, I still think fading strength makes more sense than enthusiastically buying into it.
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## JPY
JPY still looks like one of the more compelling parts of the G10 board. Ueda was hawkish enough to keep the tightening narrative alive, and if the market is finally moving toward pricing weaker growth and demand destruction globally, that should be supportive for the yen on top of the domestic story. We have already seen better demand for JPY on the institutional side, and tactically I still think short USDJPY makes sense, albeit with sizing kept sensible because the volatility is not going away. If the risk backdrop worsens again, JPY should remain one of the first places people look.
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## CHF
CHF is a little more nuanced. The SNB’s willingness to intervene has helped take some of the edge off the outright bullish CHF story, and the market seems increasingly comfortable with the idea that policymakers are more worried about the pace of appreciation than any specific level. That said, I still do not love fighting CHF strength aggressively while the geopolitical situation remains unresolved. If we do get a genuine de-escalation, then EURCHF probably becomes one of the more obvious relief trades. Until then, I can understand why people remain hesitant to press the long side too hard.
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## AUD / NZD / SEK / NOK
AUD has once again reminded everyone that it is not immune in a full-blown risk-off move, whatever the relative-value arguments may say on paper. That is important. The currency can still enjoy support in calmer conditions, but if markets move into another wave of deleveraging, AUD will struggle. NZD shares some of that vulnerability. In Scandinavia, both the Riksbank and broader regional pricing are now caught in the same ugly higher-inflation, lower-growth mix. NOK still has the obvious oil linkage, but even there I would be careful about assuming energy upside automatically translates into a clean directional currency trade when the broader market is this unstable.
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## CAD
CAD continues to look vulnerable to me, particularly on the crosses. The domestic macro backdrop still looks soft, and while higher oil would normally offer some protection, that support is proving less reliable when the market is focused on growth concerns and policy uncertainty. AUDCAD back near the highs tells you the broader CAD short story is still very much alive. Flows remain mixed, so this is not a one-way market by any means, but tactically I still think CAD underperformance remains one of the easier themes to stay with compared with some of the noisier expressions elsewhere in G10.
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## Bottom line
This is still a market where headlines are overwhelming clean macro and where liquidity is too thin to trust every move at face value. The broad preference remains to stay nimble, keep positions modest, and lean toward the more defensive expressions rather than force high-conviction cyclical trades. JPY looks constructive, CAD still looks vulnerable, GBP strength is worth fading, and EUR upside remains hard to trust.
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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!