Citi

It’s finally FOMC week, but there are plenty of other events to take note of. With markets in China, Hong Kong and Taiwan taking a long weekend, it was an understated start to this week. We think that post Fed, summer markets are likely to be in full swing.

But first, CitiFX Strategy see tactical USD upside driven by risk reduction into the June FOMC meeting and think the market reaction will likely be larger on a hawkish Fed surprise. JPY, NOK, CHF, BRL, IDR, TRY, UAH, and TWD also have central bank decisions this week, with at least a 75bps rate hike expected in Brazil and a 25bps rate hike in Ukraine. Biden continues his international tour today, and we think TRY headline risk is skewed to the upside for his meeting with Turkish President Erdogan. RUB will have to wait until Wednesday before Biden meets Putin.

For today, we see EUR industrial production numbers and a scattering of central bankers speaking today including Lagarde overnight. GBP will see confirmation of full easing being delayed.

JPMorgan

An interesting session Friday, my initial thinking that the euro has done enough on the growth catch up and the fact the ECB will stay dovish longer than most central banks weighted on the currency, however currency longs elsewhere were also dragged along for the ride as positioning proved troublesome and the usd broadly went higher across the board. This overall leaves us in no man’s land in terms of the usd, the DXY has well tested below 90 and held for now, but with the Fed likely to signal patience at their meeting this week and the US fixed income market dealing with its own positioning issues, hardly an impetus for a big usd rally either. So overall feels like interest in FX will stay pretty low for now, vols reflecting that in the main pairs. Clinging to hope that Powell delivers something to get our teeth into, but not holding my breath. In the meantime the euro holds first important support zone around 1.2100, thru 1.2080/90 will bring in more sellers and for any bullish momentum to hold I would think 1.2000 is a key level which held very well in May.

Overall risk wise leaves us without a position in eurusd itself, and long currencies which have policy normalisation in their sights, funded in usd’s and euros, although admittedly conviction is lower in most things at this point. GBP, Aud and Cad in particular, and the Scandinavian currencies although Nok doesn’t trade particularly well into a Norges Bank meeting which should indicate a rate hike in September