EUR

The market feels like a slow-moving car crash—low volatility but not enough to completely abandon positions. Aside from some random stories, there’s no major news compelling enough to flip positions. It’s November, it’s been a long year, and overall flows show a mild reduction. Yesterday, we saw some pullback in assets that had been resilient last week: AUD and Scandis in G10, and CE and Latam in EM. On the flip side, there’s been some covering of GBP shorts.

The key takeaway for me is that the dollar rallied in response to Powell’s comments, and the rates market’s repricing for December now seems fair. Meanwhile, European data has eased some concerns, and global growth forecasts have been raised. My view remains that while the Greenback rally is justified in the short term, it lacks long-term momentum. Assessing the recent equity market concerns is more challenging. Two factors complicate the outlook and limit conviction levels. First, as we approach a potential U.S. government reopening, could we see a knee-jerk dollar move as the market anticipates economic relief? Second, the Supreme Court proceedings starting today on the legality of IEEPA tariffs add uncertainty. The timing of a decision is unknown, and how Trump might react—if the ruling goes against him—is anyone’s guess.

Looking at the broader picture, it’s hard to ignore the potential for attractive entry levels across markets, but the current drift feels risky. I’m cautiously holding onto some positions while trying to limit potential damage. I still have a small euro long but have reduced my rand exposure, as the narrative feels stale. Where I’ve added slightly is in GBP—catching the proverbial falling piano. While the outlook isn’t exactly rosy, Reeves’ policy shift reduces the risk of fiscal mismanagement. This could allow the BOE to turn dovish and support growth. GBP has already moved significantly since the FT story last week, so I’m tactically looking for a small correction here. A wise colleague pointed out that sterling strengthened even when the news was negative and yields were stubborn. If yields ease, that could become the bigger driver for the currency.

I still hold EUR/SEK via options, which continues to work slowly in typical Scandi fashion—grinding higher when conditions align but correcting sharply on seemingly minor domestic news. There’s little to add on the euro itself. I’m slightly surprised by the prolonged selling, as I thought sentiment had already turned pessimistic. This is concerning for the small longs I have left. Still, I’m holding on for now. The August lows, which align with the 200-day moving average next week, serve as a critical support level. Breaking through initial resistance would be reassuring. For today, the focus seems to be on the 1.1525-35 zone. After last week’s excitement around the ADP weekly print, today’s data could provide some clarity.

GBP

I was somewhat surprised by the extent of GBP's rally yesterday. Reeves’ comments offered very little substance, and perhaps that lack of clarity led the market to interpret it negatively. It’s evident to me that she is likely to abandon her manifesto commitments before breaching her fiscal rules. While this reflects poorly on Labour, it’s not necessarily bad news for gilts. Reeves appears overly cautious about inviting comparisons to Truss, and this caution seems to underpin every tough decision she makes.

As a result, I believe GBP bears may need to wait for concrete data and a reaction from the BoE, which is unlikely to come tomorrow. This makes it challenging to justify a short position on GBP at the moment. In fact, given current levels in cable, I’ve taken some tactical long positions, with a reassessment point just below 1.30. We’ve observed decent short covering by DHFs (2z), while SHFs have continued their selling trend (10 out of the last 11 sessions). RM, on the other hand, remains largely inactive on a net basis.

Key levels to monitor include 0.8865/75 in the cross, with 0.8750/70 providing strong support. In cable, attention will be on the 1.30 level, with short-term resistance around 1.3095/1.3100 ahead of the 1.3250 mark, which aligns with the prior pivot and the 200-day moving average. All eyes will be on the MPC tomorrow.

JPY

September BoJ minutes leaned slightly hawkish. Yes, that’s correct—this was the meeting prior to the last one where they still refrained from hiking rates. Does this add more weight to December? Apparently not, as pricing ticked down to 14bp. It seems everyone is growing weary of speculating when the elusive 25bp hike will finally materialize. This likely points to December, but the market’s attention has shifted toward the pullback in tech and crypto, which is pressuring cross JPY and keeping the MoF intervention team firmly on the sidelines.

Yesterday, every sector showed stronger JPY buying, led by DHFs (1.25z) and RM (1z). However, there wasn’t much activity on the local front—this could be the angle for re-entering short USDJPY positions. For now, I’m staying on the sidelines, still reflecting on how poorly I’ve traded JPY over the past month. The 153.20/30 level broke overnight but failed to extend further. Expect continued choppiness, with 151.50 and 154.65/80 being key levels to monitor.