Global FX: unpacking CPI, euro bloc divergence, CNH resistance
The desk views the recent US CPI data as a pivotal driver for the US dollar's trajectory amid new developments in the euro bloc and China’s CNH. Per the full note from J.P. Morgan, the latest CPI figures are expected to bolster the dollar as market expectations center around a hawkish Fed leaning, which should support the greenback against its major counterparts. In light of the euro bloc disparities in economic recovery and inflation rates, the euro dollar cross may see further divergence in performance. Additionally, recent resistance in the CNH suggests potential headwinds in the subsequent valuation of the yuan amid ongoing trade concerns with the West.
What the desk is arguing
The latest US CPI data is anticipated to reinforce the dollar's strength as inflationary pressures prompt the Federal Reserve to consider tightening monetary policy. This aligns with J.P. Morgan's assertion that the dollar's outlook has turned increasingly positive given the current macroeconomic backdrop and market positioning towards higher rates. Specific figures suggest that a CPI increase could push expectations for a rate hike closer to 50 basis points, which has generally supported the dollar in past trends.
Moreover, market participants are closely monitoring how divergences within the eurozone affect the euro's performance. With Germany lagging in recovery compared to other eurozone countries, the euro may struggle against the dollar, particularly if US inflation trends reflect stronger-than-expected consumer demand. This adds a significant layer of complexity to the currency pair dynamics, suggesting that traders should prepare for heightened volatility.
Where it sits in our coverage
While our coverage on the euro remains minimal, other firms report varying targets that further highlight the expectations for the dollar against the euro. Key targets from other firms include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk’s interpretation aligns closely with the jpmorgan perspective, situated towards the upper bound of this range, indicating a bullish sentiment towards the dollar amid solid inflation readings that could force a reconsideration from the Fed regarding interest rates.
How other firms see it
Reports from aligned firms suggest a consensus of bullish sentiment towards the dollar, particularly in light of resilient US economic data, while firms like bofa imply a more cautious stance on potential downside risks from external geopolitical factors or an economic slowdown.
Central to this discussion is the EUR/USD pair, which will likely be substantially influenced by upcoming central bank policy meetings and shifts in market sentiment towards inflation data. Positioning in USD/CNH is particularly noteworthy given potential shifts in trade policies and China's economic recovery trajectory.
01US CPI data is viewed as supportive for the dollar.
02Expect further divergence in the eurozone to impact euro performance.
03CNH resistance could influence market sentiment towards the yuan.
04Dollar strength hinges on inflation dynamics and Fed policy direction.
Market implications
Traders should monitor the 1.075 level on EUR/USD closely, looking for breaks that may signal a stronger dollar trajectory ahead. Additionally, keep an eye on upcoming CPI reports as they could provoke a sharp dollar response depending on the inflation numbers.
Risks to this view
Key risks to this bullish USD call include a surprise drop in CPI that undercuts inflation narratives or a hawkish tone from the ECB that might strengthen the euro. Additionally, persistent geopolitical tensions detrimental to global trade could undermine dollar strength.
Hello, everybody, and welcome to JPMorgan's At Any Rate podcast. This is Meera Chandan, Co-Head of FX Strategy at JPMorgan, joined today by the other Co-Head, Arundhan Sandilya, all the way from Singapore, and then, of course, we have Senior FX Strategist Patrick Locke and James Nelligan on the call as well. So another week, a lot to unpack, and actually, FX is finally generating some interesting moves.
So definitely giving a bit more traction to some of the views that we've held on to quite a while, but following the Blockbuster Payrolls report, obviously, from last week, we now also had a pretty hot inflation report as well. We need to unpack that, so we'll go to Patrick later for that. Last week, we've noted how U.S. equities would behave, would be quite important on a look-ahead basis.
It wasn't our base case that the route would continue in tech stocks, but we were concerned that as we were heading into year-end period, that this could potentially become a problem. It doesn't look like it's extending things look a bit calmer, so that's good for now, but certainly, it's something that we're still very often keeping an eye on because it does impact the dimensions of U.S. exceptionalism, which is relevant for the dollar. It's relevant for carry and cyclical currencies more broadly, but the good news is that this week, things have been a bit more calmer.
Then we've had several other moving parts as well, like the oil price collapse, which has basically happened earlier in November. That's obviously been making people a lot more wary on the dollar because that would not normally be dollar bearish as the U.S. is a net exporter, but clearly, with a lot of this, we do have a lot of noise on the macro landscape, if you will. As you know, on this podcast, the JP Morgan team does endeavor to cut through the noise and focus on the lasting signals for FX.
For U.S., for currencies, for us, that has been, firstly, U.S. exceptionalism, and second is the resilient global growth story. Those two pillars, it looks like, continue for now, and the data this week has absolutely reinforced the U.S. exceptionalism view, and hence, the constructive dollar view we've had so far. We're sticking to that, even though we've already had decent moves so far, and some of the initial levels we had in mind have been met.
Why is it that we're sticking to the view, and I think it's important to address the pushback, actually. We're getting quite a few pushbacks on this dollar view, and I'm just going to address four that I've been getting with high frequency, and I'm going to give you my comeback on that, and then we'll go on to the rest of the team and discuss other parts of the world. Pushback number one for the dollar has been that it's already done a lot already.
It's closer to being at fair value from certain metrics. My comeback on that is, yes, absolutely, I think from a valuation perspective, the dollar has done a fair bit of fair lifting, but it's actually still not fully reflecting the upturn in the domestic growth story that we've seen, and certainly not on the inflation side as well. There's some valuation models on which it's still undershooting.
The second pushback we've had on the constructive dollar view is that oil is meant to decline. It's an oversupplied market. Certainly our own analysts are saying that, Natasha Koneva, that's been sort of the big view going into 2027.
That's absolutely correct. My comeback there is that if you look at the relative sensitivity of the dollar, it's substantially larger to a rising Fed terminal, particularly when you compare that sensitivity to oil. What you find is that the dollar has actually not been that reactive to oil.
The only time that was changed this year was briefly in the aftermath of the U.S. Iran conflict, but that has subsided since. The third pushback I get is that the U.S. equities exceptionalism story is challenged.
Agreed. Absolutely. This is the biggest risk in my mind on a forward-looking basis.
It's not necessary. It's not our base case, as you know, but this is a risk we are quite vigilant on. I think we recognize that this is a story that has potential to change the U.S. exceptionalism if it does get unruly.
Again, not our base case, but the way we are hedging against that would be probably looking at some defensive currencies and looking for some cheap hedges, things like yen or Swiss franc actually offer some interesting opportunities there to sort of hedge against such outcomes. And then finally, I do hear in terms of pushbacks also that the dollar should consolidate prior to the next payrolls, given that there's going to be a data vacuum and we're not going to really see very much. I think that's fair enough, but as I said, there is a bit of a valuation argument still, and also I would argue we're going through a bit of a regime shift on the Fed side and the Fed narrative as well.
So that has potential to sort of keep the dollar momentum going. So I'll stop there on my initial take, but Patrick, maybe we basically start with you first on the CPI and just break down what you stood out about this report and how are you thinking about it for the dollar on a forward-looking basis? Yeah, sure, Meera.
Thanks. So taking a step back quick, just to kind of scene set, regular listeners will recall that we've frequently just been discussing kind of like the high persistent run rates across a number of core inflation measures, persistently strong metrics of nominal growth just on a GDP basis, but also more tactically on individual claims, NFP reports recently. And that was against the backdrop of a Fed pause in October just after a 33 basis point in corporate and CPI.
And as you say, too, like dollar discounted on some rates-based fair value models. So you think about what's happened this week, what's not to like for the dollar? I mean, again, strong cyclical data out of the NFP, holistically strong CPI data this week, and it's starting to get the Fed on side too.
So the CPI itself, I mean, you've got run rates that are elevated. You've got breadth that is significant. And the surprise factor too is spiking.
So on run rates, I mean, we're looking at core on a three-month annualized 3.75, super cores north of five. So not only is it, you know, the run rates not kind of like stagnating at high levels, they're also starting to now inflect higher. And that's kind of coinciding with a spike higher in our measure of U.S. inflation surprises, which I think is particularly interesting given the backdrop of oil coming off significantly recently, right, and spending part of this summer at least, you know, below the first quarter, second quarter highs.
So that to me suggests that there is kind of like, you know, core underlying inflation persistence that is much more than anything just about oil. And it's not surprising to me in that case that the dollar has actually been quite correlated to that surprise metric. And I think the Fed too is surprised, right?
And again, they paused in October. And now you've got some key speakers this week starting to, you know, turn a little bit more aggressive there, Logan talking about, you know, accelerating the pace of hikes. And then, of course, Waller was the big one opening up the door for 50, and we've now got some risk premium for December baked in for that.
It's not the house call right now. We're still looking for 25 in December. But for me, you can definitely see a situation in which, you know, the data continues to run strong into the end of the year.
If the Fed were to do 50 in December, you know, presumably that's still against a very strong nominal growth backdrop. Inflation probably going the wrong direction. I definitely think there is material dollar upside, you know, in that scenario.
So still like everything, the dollar is generally presenting on the cyclical side, even despite kind of the rates and the DXY repricing we've had basically since Friday of last week. In terms of like, you know, preferences of how to play that, I mean, the standard betas are fairly obvious. The low yielders have the highest beta to the two-year rates, stocky Swiss yen.
So we'd expect those probably to underperform. The more cyclical stuff, especially stuff that's high yielding, Aussie, Sterling and Norway tend to be a little bit more insulated. Sterling and CAD can be too, just by virtue of kind of their low beta, you know, characteristics.
We've noted that basically CAD and Norway have kind of underperformed those betas this week because of the oil move. But generally speaking, you know, it makes sense to kind of continue to focus on dollar yen, dollar Swiss and dollar stocky to the extent that yields can continue to move higher from here. I think that's fair, Patrick.
You know, one pushback I think I would give to that is, you know, stocky completely on board with one of the most vulnerable to rising U.S. yields. I think with Swiss and yen, it's actually a slightly different story. Yen, dollar yen, we're getting towards, you know, as we approach 160, you know, that's intervention issues that start to come into play.
So actually, I think under other funders that are not as hamstrung by the potential for intervention could have a lot more downsides. So actually, I prefer, you know, personally, funders like stocky to be the underperformers. And Swiss, as I'm sure James will talk about, is also going to be supported by what's going on with the weighty spreads in general and European growth.
So I'm not too convinced about Swiss and yen versus dollar, but certainly versus, you know, stocky, I think it's a very clean story. Stocky is probably one of my favorite funders, has been all year in the G10 side. The second point that, you know, I think is quite interesting, as you were talking about central banks, is also that if you do get energy prices lower, you could actually get other central banks like Europe, like the ECB, potentially getting depriced with not so much impact on the Fed from just directly oil prices heading lower.
And so that could actually very well leave us in a situation where the Fed is out-talking other central banks, which, you know, in turn also ends up helping the dollar out there. So that's something that we have to watch, but certainly on the back of my mind as well. But James, with that, let's maybe turn it over to you for some of these European currency discussion, including the Swiss franc.
How are you seeing things evolve from here? Thanks. Yeah.
On Swiss, I think what we're seeing here is just a bit of a snapback in technical, you know, in terms of the technicals from, you know, what's been a pretty sharp move lower in Euro-Swiss, you know, up until the kind of middle of November. And we're seeing a bit of a snapback here that's, you know, in terms of, you know, Eurozone growth revisions, you know, haven't really begun moving properly lower yet. We have also seen some of the Eurozone equity baskets stage a bit of a rally.
So rather than this being a kind of one for one move with French OAP spreads, I think this is more technical in nature. And we do see it as a pretty high conviction fade over the medium term. I think from a flow perspective, it's still going to be very difficult for real money investors to engage in Euro-Swiss.
And we, you know, we do expect with ECB tightening to start feeding through to the Eurozone data that this kind of move up to kind of the high 92s in Euro-Swiss is a pretty convincing fade to us. For sterling, we're still, you know, we're still looking for gains in sterling. And I think it's been quite frustrating over the past week or so where you've had, you know, very hawkish Bank of England, you had a pretty solid GDP report this week.
And it's been it's been difficult for sterling to make gains. I think part of that is the dollar taking a bit of a front foot and, you know, causing that drawdown in cable, which may have kind of held Euro sterling up a little bit. And then before that, you had the equity market move last week, which may have had the same effect.
But we do have the EU summit next week in terms of UK event risk. Well, we do expect kind of tones coming out of that to be along the lines of a closer EU-UK relationship, maybe some progress on things like youth mobility scheme at a time where Burnham's been very specific about, you know, the potential benefits of an EU deal. He spoke about it this week, potentially adding 0.4 to UK GDP, which is very, very specific comments.
It's kind of top of mind for him. So I wouldn't be surprised to see the mood music quite positive coming out of that event next week. We also have UK CPI where our economist is above consensus.
So obviously keeps December Bank of England relatively in play. So, you know, potentially setting up for a decent week for sterling next next week. But we do think medium term upside is still still very valid as well.
And then for Scandi's, you know, very much agree with Mira that, you know, stocky, I think after this week's developments in the US combined with that corporate that we got in Sweden last week, you know, core tracking at 0.1 in Sweden and, you know, in the high twos in the US. I mean, it's a very stark difference there in terms of inflation momentum is being reflected in, you know, in terms of the central bank stance as well. So the right way to view stocky here is very much via dollar stocky rather than euro stocky here.
And I think stocky is reverting back to its kind of classic funder status that we've been pushing this year. And I very, very much agree with that view. And then Noki, I think, you know, you've seen a bit of a correction here on the back of equities and oil.
And it's it does does, you know, even though fair value for euro and Noki is is a bit higher. You know, it's going to be very difficult to pick the exact turning points on these things. And, you know, you look at the oil situation here.
You've had Iran pushing back on on the idea of a deal. Energy price is forming a bit of a base. And our equity strategists are pushing the view that, you know, capex capex weakness in twenty eight, twenty nine is reasonably well priced now in terms of equity.
So, you know, Noki obviously sensitive to both of those things. We didn't really get the green light in terms of Norwegian CPI this week, but we do have another print print before the December meeting in terms of Norges Bank and that that is potentially a live meeting. So, you know, we do view these kind of levels as, you know, levels where you can start to get a bit more constrictive on Noki again.
Thanks a lot, James, and certainly the, you know, the relative asymmetric reaction function of, you know, Noki relative to oil prices is something that's really standing out to me as well. Arindam, let's turn to you. This is interesting what's going on in CNH.
I would love to hear your latest thoughts on that. And also on popular demand, we have had some feedback and requests for some teams on the FX option side. So what stands out to you on that front as well?
Yeah, I mean, so a couple of things. First on CNY, we have taken a tactical step back from what has been a constructive view on the currency almost all year long. The broad view hasn't changed.
This is more of a tactical view management. It's worked well for the last two, two and a half months that we've been pushing this. But now the big presidential summit is over and you do have an air pocket between now and call it the first little bit of December when your CNH in particular tends to have a bit of a bop and we are trying to navigate that.
But otherwise, the catalyst for sort of taking a little bit of a step back is that you started to see signs of the PBOC pushing back against linear currency appreciation, which has been in trend paying for the last couple of months. Last week, PBOC raised the FX requirement ratio by two percentage points. They have other tools at their disposal as well.
They could increase this RLR further. They could open up more channels to permit domestic outflows. They've used this in the past.
Doesn't mean that it's going to delay the trend in any way. If you look at how far the CNY basket is from trailing moving averages, you know, you are very far from the sort of levels where in the past this has marked the end of the CNY trend. So there's space for the RMB to appreciate.
And we are very much of that view. This is also heading into a seasonally friendly time of the year for the currency. But as I said, just respecting the central bank's move on the currency and our sort of mini seasonality around it, if you will.
On the FXO side of things, I guess a couple of things worth flagging and one thing that we have been pushing for the last few months, especially since we started to see mostly the Yen intervention in the summer, is this idea that the distribution of dollar Yen outcomes is fairly curtailed. So north of 160 outcomes, unlikely. If you're able to collect option premium from selling that part of the distribution, you should do something with it.
And what we have been advocating is to use that option premium to buy bullish tolerant exposure elsewhere. And I think broadly, that's been a construct that's played out fairly well. But of course, this week and particularly today, we've started to see a lot more verbal job warning coming out of the highest levels of the Japanese government.
Risk aversions in Yen have risen as a result. The market is on red alert for more intervention. So if you are an investor, it is very difficult to time these things.
So you can be bullish on the Yen in cash. The other way to do it is to just give yourself time and space to remain in this trade for a period of time. So one way to go about that is to sell the north of 160 side of the distribution, sell the 153, 154 side of the distribution, because risk reversals are rich and own the part in the middle.
And we have been pushing some structures like this and they have held value reasonably well so far. I think it allows people to stay in the trade. And then the second thing I'd say is, you referred to AI jitters at the very beginning of your comments.
And that's front and center for all the ball requests that we have been fielding. How to hedge AI crash risk is the number one cost question. And I think in that context, two observations worth making here.
First is, if we look at the behavior of effects through the jitters of October and immediately post midterms, there's only one currency really that we need to script as a conventional risk of hedge and that was Aussie. And if you think about the Yens of the world, they didn't really do what they were supposed to, sway state value a little bit, but not with the velocity that people might have anticipated. So a lot of the interest that I'm fielding is of the bearish Aussie variety.
There is probably a domestic story there, but more to it is the risk beta and how to be bearish and Aussie via options. One of the things that I'd flag as a second observation is, if you look at levels of option implied correlations, generally we've been in a regime since post pandemic where dollar based correlations have been very high and sticky. And in a world where you are thinking about tail risks on equities, if you see similarly elevated dollar correlations between an asset currency like Aussie and a funding currency like Yen or Swiss, I think those correlations look too high, potentially even wrong for a world of greater risk.
So selling those correlations, i.e. buying those cross the involves, you know, through various kinds of correlation structures, I think is not a bad shot. Thanks a lot, Arindam, and hopefully, you know, we'll get more feedback on that, but certainly keep the feedback coming, everybody, and, you know, take a look at our website if you want to look at our analysis in more detail. This communication is provided for information purposes only.
Please refer to J.P. Morgan Research Reports related to its content for more information, including important disclosures. 2026 J.P. Morgan Chase & Company, all rights reserved.
This episode was recorded on November 13, 2026.
Tier 1
Democrats gearing up to probe JPMorgan's relationship with Epstein, CNBC reports