Summary of Global FX Outlook 2026 Company and Industry - **Company**: J.P. Morgan - **Industry**: Foreign Exchange (FX) Market Key Points and Arguments 1. FX Outlook for 2026 - The outlook is bearish on the dollar in the first half of 2026 due to Fed asymmetries, twin deficits, and global recovery, but weakness is constrained by US resiliency [6][37][38] - Expected currency levels include EUR/USD at 1.20, USD/JPY at 164, and USD/CNY at 7.05 [6] 2. Drivers of FX Returns in 2025 - DM FX returns were influenced by external and fiscal balances, while global FX/EM returns were primarily driven by carry [5][8] - Liberation Day marked a significant weakening of the dollar, leading to a pro-risk environment characterized by strong performance in global/EM carry trades [5][10] 3. Lessons from 2025 - The dollar's strength was short-lived, with key risks materializing earlier than expected, leading to a shift from bullish to bearish sentiment [4][10] - Fiscal differentiation played a crucial role, with the Euro's rise linked to positive German fiscal developments [14] 4. Macro Landscape for 2026 - The macro environment is characterized by synchronized central bank inactivity, ongoing fiscal policy focus, and the impact of AI adoption [6][12] - The US policy mix remains a source of FX risk, with a focus on fiscal policy rather than tariffs [6][12] 5. AI and Market Dynamics - AI is expected to influence markets through financial and macro channels, potentially supporting US growth but also reviving de-dollarization discussions [29] - The macro effects of AI are still developing, with job displacement not yet materializing significantly in labor market data [29] 6. Fiscal Policy and Tariff Volatility - Fiscal policy surprises are anticipated, particularly in the US, with potential for stimulus surprises due to mid-term elections [28] - Tariff volatility is expected to decrease in 2026, although some tactical volatility may arise from IEEPA rulings [60][67] 7. Dollar's Carry Appeal - The dollar's nominal carry appeal remains high despite Fed easing, influencing asset owners' FX hedging decisions [50] - The dollar's performance is expected to be influenced by various macro scenarios, including potential Fed hikes in 2027 [49][50] 8. Risks and Scenarios for the Dollar - The dollar could weaken if US growth moderates sharply or if the Fed's reaction function turns dovish amid political pressures [48][39] - Conversely, a stronger US growth scenario could lead to a bullish outlook for the dollar [48][58] 9. Conclusion on FX Trends - The FX landscape heading into 2026 is marked by lower dispersion across style factors, indicating less conviction on differentiating currency returns [30] - High-yielding currencies are expected to perform better in a procyclical growth environment, while low-yielders may lag [6][37] Other Important Content - The relationship between equities and FX is complex, with significant implications for the AI equity-USD link in the upcoming year [15] - The evolving dollar smile indicates that US-RoW relative cyclical dynamics are becoming more influential on the dollar's performance [15]

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the **foreign exchange (FX) market** and the **cross-border capital flows**, with a focus on the **USD** and **EUR** currencies. Key Takeaways 1. **USD Investor Demand** - The demand for USD by Bank of America (BofA) investors in the past month was the strongest since June 2024, driven mainly by asset managers. - Asset managers' USD buying last week was the largest since July, although they remain net short on dollars, indicating a light position overall [1][5][6]. 2. **EUR Supply Dynamics** - There was a significant supply of EUR last week, the strongest since May, primarily driven by corporates. - All BofA client types, except hedge funds, were net sellers of EUR, suggesting a souring sentiment towards the currency [6][10]. 3. **Emerging Market (EM) FX Flows** - EM FX flows turned negative across all regions, indicating a moderating sentiment. - Notable selling was observed in currencies such as SGD, ZAR, BRL, and to some extent, MXN [7][9]. 4. **Investor Positioning** - The positioning of BofA investors in G10 currencies as of October 31, 2025, shows varied sentiment across different currencies, with asset managers showing a slight long position in EM currencies [24][27]. - The aggregate positioning for USD was noted to be negative, while positioning for AUD and NZD showed some positive trends [16][24]. 5. **Options and Futures Flows** - The snapshot of FX options and futures flows indicates mixed sentiment, with some currencies like JPY and GBP showing negative positioning, while others like AUD and NZD had positive flows [14][33]. Additional Insights - **Market Sentiment** - The overall sentiment in the FX market appears to be cautious, with a notable shift in positioning among asset managers and hedge funds, reflecting broader market uncertainties [4][6][24]. - **Potential Risks** - The report highlights potential risks associated with the current positioning and market dynamics, suggesting that investors should be aware of the volatility and changing trends in the FX market [4][5]. - **Data Sources** - The analysis is based on proprietary data from BofA Securities, including flow data, positioning data, and market sentiment surveys, providing a comprehensive view of the current market landscape [9][30]. This summary encapsulates the critical insights from the conference call, focusing on the dynamics of the FX market, investor behavior, and emerging trends that could influence future investment strategies.

Summary of Key Points from the Conference Call Industry Overview - The focus of the conference call is on the **US Dollar (USD)** and its associated risks, particularly in relation to global economic conditions and monetary policy dynamics. Core Insights and Arguments 1. **USD Weakening Expectations**: The expectation is for the USD to weaken over the next year, particularly against risk-sensitive currencies, due to falling US real yields and narrowing growth differentials with the rest of the world [8][11][12] 2. **Growth Convergence**: US growth is projected to slow to approximately **1.3% in 2026**, converging with growth rates abroad, which is consistent with the "dollar smile" framework [27][28] 3. **Policy Risks**: The narrowing of the USD's discount to yield-implied fair value is anticipated, with expectations that it may re-widen due to ongoing trade policy and Federal Reserve independence risks [8][11][40] 4. **Fiscal Concerns Abroad**: Easing fiscal concerns in countries like Japan, the UK, and France are expected to reduce the positive premium on the USD, contributing to its decline [8][50][52] 5. **Current USD Positioning**: USD positioning is currently slightly long, indicating a shift from previous short positions, which reduces the risk of significant price swings [12][67] Additional Important Insights 1. **Interest Rate Forecasts**: The forecast indicates that **10-year TIPS yields** will decline to **1.25%** by mid-2026 and further to **0.9%** by the end of next year, contributing to a bearish environment for the USD [14][15] 2. **Trade Recommendations**: Recommendations include maintaining short positions on USD against currencies such as EUR, JPY, GBP, CAD, and AUD, with specific target prices provided for each currency pair [16][69] 3. **Risks to USD Outlook**: Upside risks to the USD could arise from stronger-than-expected US growth or a downturn in sentiment regarding investment opportunities outside the US [11][34][36] 4. **Yield Differential Dynamics**: The narrowing of US-RoW rate differentials is expected, with **2-year US yields** projected to decline to **2.0%** by next year, while **2-year German yields** are expected to decrease to **1.6%**, significantly compressing the spread [20][21] 5. **Fiscal Sustainability**: Concerns about fiscal sustainability in Japan and the UK are expected to ease, which may further weigh on the USD as these countries stabilize their fiscal positions [50][52][61] Conclusion The conference call presents a comprehensive analysis of the USD's outlook, emphasizing the interplay between interest rates, growth differentials, and fiscal policies. The overall sentiment leans towards a bearish outlook for the USD, with specific trade strategies recommended to capitalize on anticipated currency movements.

More ways to power your perps 🔋You can now open positions with USD, EUR, CHF, $USDT, and $USDCGet started in the Kraken app ⤵️https://t.co/kNLzHGj5n7Available in select countries. https://t.co/dNuDUETKBd ...

RT Harp (@GarrettHarper_)If you're building on @solana and you have cash on your balance sheet, it's time to open your @tryaltitude account.- Receive and send USD/EUR bank transfers.- 5.00% APY with Altitude Earn.- Email sign in and full gas abstraction.- Team management and permissions.- A beautiful UX that puts products to shame.- More cash management tools coming (e.g. corporate cards).Powered by @USDC and EURC. ...

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the currency strategy and cross-border flows, particularly regarding the US Dollar (USD) and its positioning against other currencies such as Japanese Yen (JPY), Swiss Franc (CHF), and Emerging Market (EM) currencies [1][7]. Core Insights - **Negative USD Flows**: The USD flows turned negative, primarily driven by Hedge Funds, with JPY, CHF, and EM currencies being the main beneficiaries [1][7]. - **Crowded USD Shorts**: The report indicates that USD shorts are not crowded, with bearish sentiment mainly expressed through options rather than outright positions [1][7]. - **G10 Currency Trends**: Investors have been avoiding or selling EUR and GBP due to fiscal concerns, while showing increased interest in JPY and CHF [8][9]. - **Emerging Market Demand**: There has been a notable acceleration in demand for EM currencies, particularly in Asia and Latin America, with CNH (Chinese Yuan) and INR (Indian Rupee) standing out [14][20]. Important Data Points - **Hedge Fund Positioning**: Hedge Funds have ample room to sell USD further, indicating potential for continued bearish sentiment [4][6]. - **G10 FX Flows**: The report highlights that BofA investors sold USD against EM FX, CHF, and JPY, while avoiding EUR and GBP [10][12]. - **Regional Highlights**: - **Asia**: Strong demand for CNH and INR from Hedge Funds and Asset Managers [20]. - **LatAm**: Demand driven mainly by Hedge Funds, with COP (Colombian Peso) and CLP (Chilean Peso) being notable [20]. - **EMEA**: Mixed flows, with Hedge Funds buying HUF (Hungarian Forint) and Asset Managers selling CZK (Czech Koruna), ILS (Israeli Shekel), and TRY (Turkish Lira) [20]. Additional Insights - **Options and Futures Flows**: The report provides a snapshot of FX options and futures flows, indicating a bearish sentiment towards USD expressed through options [24]. - **Market Positioning**: The G10 FX positioning scorecard shows that the market is long on EUR, AUD, and short on USD, NZD, CHF, and CAD, with bearishness on USD primarily through options [26]. - **Recent Price Action**: The recent price movements in currencies have not fully aligned with the flows, indicating potential discrepancies in market expectations versus actual positioning [31]. Conclusion - The analysis suggests a cautious outlook on the USD, with significant shifts in investor sentiment towards JPY, CHF, and various EM currencies. The data indicates potential opportunities for investors to capitalize on these trends while being mindful of the risks associated with currency fluctuations and positioning dynamics [1][7][14].

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Foreign Exchange (FX) Market - **Key Focus**: Analysis of various currencies including CNY (Chinese Yuan), USD (US Dollar), EUR (Euro), INR (Indian Rupee), Scandi FX (Swedish Krona and Norwegian Krone), and CHF (Swiss Franc) [1][7][9][10][15] Core Insights and Arguments CNY (Chinese Yuan) - Recent strength in CNY is attributed to policy push rather than market pressure, with policymakers moving the fixing stronger despite market conditions [1] - CNY is considered significantly undervalued, comparable to the "China shock" period in the mid-2000s, supported by large export market share gains and a surge in the current account surplus [1] - Continued adjustments in CNY are expected, impacting FX markets and reducing the burden on the Euro to drive Dollar depreciation [1] USD (US Dollar) - The broad Dollar has been range-bound, but factors leading to its depreciation remain active, including a softening labor market and subpar growth expectations [7] - A significant rise in unemployment above 4.40% could impact rates-sensitive currency pairs like EUR/USD and USD/JPY [7] - Global asset allocators are likely to seek ways to hedge FX risks due to Dollar dominance, influenced by institutional governance concerns [8] EUR (Euro) - Political developments in France, including a confidence vote, are unlikely to alter the fundamental outlook for the Euro, despite potential volatility [9] - The Euro is expected to strengthen, with other currencies likely to outperform after the Euro's initial leadership in the Dollar's decline [9] INR (Indian Rupee) - The outlook for INR is clouded by new tariffs on Indian exports to the US, leading to heavy equity outflows and a return to all-time highs for USD/INR [10] - The effective tariff rate is estimated at around 32%, impacting export forecasts and current account projections [10] Scandi FX (NOK and SEK) - Both NOK and SEK are expected to strengthen against the Dollar, supported by global trends and Dollar hedging programs [10] - The upcoming Norwegian general election poses a risk for NOK, particularly regarding potential changes to the sovereign wealth fund's currency channeling policies [10] CHF (Swiss Franc) - A recommendation to short EUR/CHF is based on the belief that US importers will struggle to substitute Swiss goods, thus limiting necessary currency adjustments [15] - The risk-reward for this trade has become less favorable, but further movement towards the target of 0.93 is still anticipated [15] Additional Important Insights - The report emphasizes the importance of macroeconomic factors and policy changes in shaping currency valuations and market dynamics [1][7][9][10][15] - The analysis includes forecasts for various currency pairs over different time horizons, indicating expected movements and potential misalignments with fundamentals [21][23] - The report highlights the need for investors to consider multiple factors in their investment decisions, including geopolitical risks and economic indicators [3][27] This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of the current state and outlook of the FX market.

Stablecoin Market Dominance - USD is the most widely tokenized currency [1] - No EUR stablecoin appears in the top 20 by supply [1] Geopolitical Implications - The data visualizes US hegemony in the stablecoin market [1]

Stablecoin Market Dominance - USD is the most widely tokenized currency in the stablecoin market [1] - No EUR stablecoin is among the top 20 stablecoins by supply [1]

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **foreign exchange (FX) market** and the **cross-border flows** as analyzed by BofA Global Research. Core Insights and Arguments 1. **Consolidation of FX Flows**: The FX flows in Q3 are characterized by consolidation, particularly after significant positioning adjustments in the first half of the year. Investors have favored USD, CHF, and emerging market (EM) currencies against JPY, GBP, and CAD [1][7][8]. 2. **Investor Positioning**: Among BofA investors, USD short positions are relatively light compared to historical levels, indicating a cautious approach towards USD selling [4][5]. 3. **Hedge Fund Activity**: Hedge Funds have shown a notable demand for Brazilian Real (BRL) and have been net sellers of EURGBP, while also supporting GBP recently [7][8][13]. 4. **G10 Currency Trends**: GBP has benefitted the least from USD supply year-to-date, with Hedge Funds primarily supporting it, joined by Asset Managers in the last week [9][10]. 5. **Emerging Market (EM) Focus**: Latin American currencies have seen strong demand in Q3, with BRL demand highlighted. In Asia, there was notable demand for Indonesian Rupiah (IDR), while in EMEA, Hungarian Forint (HUF) demand was significant amid geopolitical developments [13][20]. 6. **FX Options and Futures**: The report includes a snapshot of FX options and futures flows, indicating varied positioning across different currencies, with USD options showing a positive z-score recently [22]. Additional Important Details 1. **Aggregate Positioning Data**: The report provides detailed aggregate positioning data for various currencies, indicating shifts in investor sentiment and positioning over time [24][32]. 2. **Risk Considerations**: The report emphasizes that trading ideas and investment strategies discussed may involve significant risks and are not suitable for all investors, highlighting the need for experience and financial resources to absorb potential losses [6]. 3. **Future Reports**: The next report on Liquid Cross Border Flows is scheduled for release on September 1st, indicating ongoing monitoring of FX flows and positioning [6]. This summary encapsulates the key points discussed in the conference call, providing insights into the current state of the FX market and investor behavior.