Core Viewpoint - The State Administration of Foreign Exchange of China reported the trading volume of the foreign exchange market for December 2025, indicating significant activity in both the customer and interbank markets, as well as in spot and derivatives trading [1]. Group 1: December 2025 Trading Data - The total trading volume in China's foreign exchange market (excluding foreign currency pairs) reached 28.17 trillion RMB (approximately 3.99 trillion USD) in December 2025 [1]. - The customer market accounted for 4.78 trillion RMB (about 0.68 trillion USD), while the interbank market had a trading volume of 23.39 trillion RMB (around 3.31 trillion USD) [1]. - The spot market saw a cumulative trading volume of 10.44 trillion RMB (equivalent to 1.48 trillion USD), and the derivatives market totaled 17.73 trillion RMB (approximately 2.51 trillion USD) [1]. Group 2: Annual Trading Data for 2025 - For the entire year of 2025, the cumulative trading volume in China's foreign exchange market reached 304.57 trillion RMB (approximately 42.64 trillion USD) [1].

Core Insights - The total turnover of China's foreign exchange market reached 28.17 trillion RMB (approximately 3.99 trillion USD) in December 2025 [1] - The cumulative turnover for the entire year of 2025 was 304.57 trillion RMB (approximately 42.64 trillion USD) [1] Market Breakdown - The customer market turnover was 4.78 trillion RMB (approximately 0.68 trillion USD) [1] - The interbank market turnover was 23.39 trillion RMB (approximately 3.31 trillion USD) [1] - The spot market turnover was 10.44 trillion RMB (approximately 1.48 trillion USD) [1] - The derivatives market turnover was 17.73 trillion RMB (approximately 2.51 trillion USD) [1]

Summary of Morgan Stanley's G10 FX Strategy Conference Call Industry Overview - The conference call focuses on the G10 foreign exchange (FX) strategy, analyzing various currencies and their outlooks in the context of global economic conditions and central bank policies. Key Points by Currency 1. USD (DXY) - **View**: Neutral - **Skew**: Bearish - **Insights**: - Increasing downside risks for the DXY due to soft US economic data and hawkish foreign central banks - Limited investor appetite to engage, suggesting a neutral position with a downside bias into year-end [2][3][19] 2. EUR - **View**: Neutral - **Skew**: Bullish - **Insights**: - Upside risks for EUR/USD are increasing, with potential divergence between ECB and Fed policies in 2026 - The largest impact on EUR/USD is expected to come from the USD side [4][21] 3. JPY - **View**: Neutral - **Skew**: Neutral - **Insights**: - Few catalysts to prevent JPY weakness amid uncertainty regarding the 2026 budget - Any intervention by the Ministry of Finance (MoF) could significantly alter the current trend [5][23] 4. GBP - **View**: Neutral - **Skew**: Neutral - **Insights**: - GBP's status as a high carry/volatility currency is diminishing - The Bank of England's recent hawkish tone may delay the need to reprice terminal rates lower [6][24] 5. CHF - **View**: Neutral - **Skew**: Bearish - **Insights**: - Bearish skew maintained due to low volatility and absence of external catalysts - Fair value metrics suggest EUR/CHF should be around 0.92, indicating potential downward pressure [7][25] 6. CAD - **View**: Bullish - **Skew**: Bullish - **Insights**: - Soft US economic data contrasts with a recovery in Canadian data, favoring CAD - Recommendations include shorting USD/CAD due to favorable rate differentials [8][26] 7. AUD - **View**: Bullish - **Skew**: Bullish - **Insights**: - Rising private credit indicates strong domestic demand - A retest of 0.6700 is likely if RBA minutes are hawkish [9][27] 8. NZD - **View**: Neutral - **Skew**: Bullish - **Insights**: - Expected support for AUD/NZD around 1.15, with potential for a breakout above 1.16 - Factors include dovish RBNZ signals and fair valuation [10][28] 9. SEK - **View**: Bullish - **Skew**: Bullish - **Insights**: - Elevated global risk demand and a mildly hawkish Riksbank support SEK's outlook - Recommended to stay short EUR/SEK [16][29] 10. NOK - **View**: Neutral - **Skew**: Neutral - **Insights**: - Soft oil demand and potential Norges Bank cuts suggest NOK may lag behind SEK - Monitoring of oil prices and economic data is crucial [17][31] Additional Insights - The overall sentiment indicates a cautious approach towards USD, with expectations of a potential decline as investors prepare for 2026 - The divergence in central bank policies, particularly between the US and Europe, is a significant theme influencing currency movements [19][21] Conclusion - The G10 FX strategy reflects a complex interplay of economic data, central bank policies, and market sentiment, with specific recommendations for trading strategies across various currencies.

Core Viewpoint - Advancements in electronic trading and algorithmic trading are significantly reducing volatility in the currency market, leading to a calmer trading environment that may impact market makers' profitability [1][2][3]. Group 1: Market Volatility - The foreign-exchange market, valued at $7.5 trillion a day, is experiencing near-record low volatility, marking a long-term decline despite occasional spikes due to events like US trade tariffs [2][4]. - The euro's intraday movements are currently less than half of the long-term average, contrasting with Treasury yields that are fluctuating in line with historical patterns [4]. Group 2: Impact of Electronic Trading - The ability for volatility to decrease rapidly has increased significantly, with market reactions to economic data now returning to normal within 30 seconds, compared to longer durations previously [3][5]. - The changing landscape of market participants, including the rise of pod shops and competing systematic strategies, is contributing to a more stable trading environment [6]. Group 3: Strategic Shifts - The rarity of significant volatility events is leading asset managers to adjust their strategies, moving away from using calm periods to acquire cheap hedges against potential market flare-ups [7].

Core Insights - In July 2025, China's foreign exchange market recorded a total transaction volume of 28.28 trillion yuan (approximately 3.96 trillion USD) [1] - The customer market transactions by banks amounted to 4.06 trillion yuan (about 0.57 trillion USD), while interbank market transactions reached 24.22 trillion yuan (around 3.39 trillion USD) [1] - The spot market had a cumulative transaction of 9.47 trillion yuan (approximately 1.33 trillion USD), and the derivatives market totaled 18.81 trillion yuan (about 2.63 trillion USD) [1] - From January to July 2025, the cumulative transaction volume in China's foreign exchange market was 179.15 trillion yuan (equivalent to 24.96 trillion USD) [1]

Core Viewpoint - The foreign exchange market exhibits cyclical patterns driven by economic, policy, seasonal, emotional, and geopolitical factors [11] Group 1: Reasons for Cycles in the Forex Market - Economic cycles directly influence currency strength, with strong economies typically leading to currency appreciation and weak economies to depreciation [2] - Central bank policies, particularly interest rate cycles, are key drivers, with the Federal Reserve's monetary policy often setting the trend for the dollar [2] - Seasonal patterns can cause specific currencies to exhibit regular fluctuations during certain months or quarters [2] - Market sentiment oscillates between greed and fear, impacting the performance of high-risk currencies versus safe-haven currencies [2] - Geopolitical events have their own cycles, affecting related currencies during periods of tension or resolution [2] Group 2: Identifying and Utilizing Forex Cycles - Monitoring central bank policies and economic indicators like GDP and inflation is crucial for understanding macro trends [3] - Technical analysis tools such as moving averages and oscillators can help identify market trends and potential reversal points [4] - Market sentiment can be gauged through the VIX index and CFTC positioning reports, indicating potential shifts in risk appetite [5][6] Group 3: Practical Applications of Cycles - Traders should align their strategies with prevailing cycles, such as capitalizing on the end of a rate hike cycle [7] - Recognizing turning points at the end of cycles can help capture new opportunities as trends shift [8] - Risk management is essential, as cyclical patterns are not foolproof and unexpected events can occur [8] Group 4: Key Reminders for Successful Trading - Cycles serve as a tool rather than a guaranteed method for success, emphasizing the need for continuous learning and system development [16] - Establishing a disciplined approach to trading, including strict adherence to plans and emotional control, is vital for long-term success [10]

Core Points - CME Group has opened registration for the 22nd annual CME Group University Trading Challenge, scheduled from October 5 to October 31, 2025, with a registration deadline of September 25, 2025 [1][2] - The Trading Challenge provides an educational platform for undergraduate and graduate students to manage market risks and protect mock investment portfolios [2][3] - Since its inception 22 years ago, over 35,000 students have participated in the challenge, highlighting the growing interest among young people in financial markets [3][4] - Last year, the challenge saw a record participation of 570 teams, comprising approximately 2,300 students from 180 universities across 24 countries, with Indiana University winning the 2024 competition [4] - CME Group is dedicated to educating future finance professionals about global derivatives markets and risk management through various initiatives, including the Trading Challenge and educational resources like Futures Fundamentals [5][6]

Investment Rating - The report maintains a high conviction level on several currency trades, including short USD/TWD and long EUR/INR, both rated at 4/5 [5][9][11]. Core Insights - The report emphasizes a weaker USD trend supported by geopolitical developments, particularly the de-escalation of tensions between the US and Iran, which is expected to strengthen the softer USD theme [3][5]. - There is a notable shift in US portfolio allocation, with signs of slowing inflows into US equities and bonds, indicating potential reallocation into other global markets [7]. - The report highlights the importance of upcoming US labor market data, particularly the June nonfarm payrolls, which could significantly impact USD movements [7][20]. Summary by Sections Asia FX Strategy - The conviction level for short USD/TWD has been raised to 4/5, with a target of 27.0 by mid-July, reflecting strong foreign equity inflows and limited scope for the CBC to intervene [9][11]. - Long EUR/INR position has its target increased to 103, supported by the RBI's FX bias and expected continued foreign inflows [11][12]. - The report maintains a long USD/HKD position, anticipating continued HKD liquidity withdrawal by the HKMA [13]. G10 FX Strategy - Long EUR/GBP is maintained with a target of 0.8750 by end-October, driven by sticky inflation in the Eurozone and a weaker USD [20][24]. - Short USD/JPY is recommended, targeting 136 by end-September, as the risk of major JPY weakness has subsided [19][24]. - Long NZD/CAD is positioned with a target of 0.8520 by end-September, supported by improved global sentiment and a weaker USD [22][23]. Asia Rates Strategy - High conviction is maintained for pay 5y China NDIRS, expecting higher long-end rates due to anticipated stimulus measures from Beijing [25]. - In India, a 2y NDOIS receive position is maintained, with expectations for INR rates to trade in a narrow range due to recent RBI actions [26]. - The report suggests exiting pay Sep-IMM 5y NDIRS in Korea, as market pricing may be low relative to expected growth and fiscal policy [27].