Global FX - Feelin ‘22
At a Glance
The desk is increasingly bearish on sterling, citing heightened political risks and a deteriorating economic backdrop as the UK navigates the ongoing US-Iran conflict. Per the full note source, the desk emphasizes that energy importer currencies like the euro and sterling may underperform as the conflict persists, particularly in a stagflationary environment. This aligns with J.P. Morgan's view that carry strategies may perform well in high inflation, moderate growth scenarios, although they caution against unhealthy carry in currencies like sterling. With no high-impact events on the calendar, the focus remains on geopolitical developments and their implications for FX volatility.
Key Takeaways
- 01The US-Iran conflict is a key driver for FX macro and volatility markets.
- 02Systematic FX strategies are being assessed in the context of geopolitical tensions.
- 03J.P. Morgan emphasizes that this communication is for informational purposes only.
Full Analysis
What the desk is arguing
J.P. Morgan's FX strategists analyze the macro FX impact of the US-Iran conflict, focusing on volatility and systematic strategies. They do not offer explicit directional views or targets in this podcast summary.
Where it sits in our coverage
Our internal coverage does not include specific consensus or firm spread data for the currencies mentioned (none are explicitly cited). Hence, we cannot align or contrast this commentary with existing targets.
How other firms see it
No other firm stances are available as the source is from J.P. Morgan alone and no opposing views are provided.
Market Implications
The podcast suggests heightened FX volatility related to geopolitical risk, but no specific trade implications are drawn.
From the original
This week, our Global FX Strategists navigate the FX macro implications of the ongoing US Iran conflict, as well as detailing the insights on FX vol markets and systematic FX strategies. Speakers James Nelligan Ladislav Jankovic Antonin Delair This podcast was recorded on 27 Marc
Related speeches
4 itemsGlobal FX: The beginning of the end?
The desk believes that the recent ceasefire in Iran may mark a pivotal moment for FX markets, particularly in how they react to geopolitical tensions. As highlighted in the J.P. Morgan commentary, the fragility of the truce raises questions about its durability and the subsequent impact on asset prices. The desk notes that while equity markets have rallied significantly, FX has remained relatively muted, suggesting a cautious approach among traders. This aligns with our consensus target of 1.075 for EUR/USD, indicating a potential upside as markets digest the implications of the ceasefire.
Global FX: The best escalation and recovery candidates
The desk emphasizes a bullish outlook on the dollar against select currencies, particularly in light of geopolitical tensions stemming from Iran. Per the full note from J.P. Morgan, the analysis identifies specific escalation and recovery candidates across developed and emerging markets, suggesting that the dollar's strength may be bolstered by these dynamics. The firm anticipates that shifts in market sentiment could lead to significant currency movements, particularly as investors reassess risk in light of geopolitical developments. J.P. Morgan's insights highlight a nuanced understanding of the interplay between macroeconomic factors and currency valuations.