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.
Global FX: Oil turns up the heat on central banks & FX
The desk posits that the ongoing US-Iran conflict is exerting upward pressure on oil prices, which in turn is influencing central bank policies and the strength of the US dollar. Per the full note from J.P. Morgan, the recent hawkish stance from central banks could lead to a stronger dollar, but the relationship is not straightforward. The desk highlights that the dollar's trajectory is closely tied to geopolitical tensions and oil market dynamics. With no high-impact events on the calendar in the next month, traders should remain vigilant to shifts in oil prices and central bank communications.
Global FX: Yen intervention, re-assessing USD bearish view, central bank rundown
The desk sees a nuanced shift in the FX landscape, particularly regarding the Japanese Yen and the U.S. Dollar. Per the full note from J.P. Morgan, the recent intervention in the Yen and evolving views on the Dollar suggest a more balanced outlook, moving away from a purely bearish stance. The potential for further rate hikes from the Fed, coupled with Japan's intervention efforts, indicates a complex interplay of monetary policies that could affect currency valuations. As we assess these dynamics, the upcoming RBA meeting and U.S. payroll data will be critical in shaping market sentiment.
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