EUR

I was right not to be excited. Things still fairly rangy and volumes light. I do wonder this week

when people say low vol growth ok environment when we have had weak ADP, UK labour

market, ZEW and Sentix whether we are a bit complacent, yet EM and equities still trade

resilient admittedly.

Still don’t have a huge conviction on the dollar here, but sticking with some stories I don’t mind

being patient with, short eursek and long kiwi at these levels are in that bucket. Where I sold

yesterday (or flipped) was in sterling where I was a bit puzzled by the aggressive selloff last

week on the OBR story (a known) last week in light of reasonable survey data, but with

yesterday’s employment report weak across the board, our economist reacting by moving

forward and adding BOE cuts to the forecast and then political news overnight, it seems like the

clouds are looming and worth a shot.

Whilst the euro ground up yesterday we are still overall seeing better selling from what I would

think are more interesting sectors of the franchise (corps and real money) so whilst I am a little

shifty (out of last longs last week at marginally worse levels than here) am not really seeing

anything from the franchise which would make me jump back in or FOMO just yet.

GBP

Well I must say, positioning aside, the picture for the UK has certainly got darker on a few

fronts in the past 24 hours. The employment figures were broadly poor and it feels like we are in

the long awaited occurrence of the LFS catching down to the surveys (REC due Friday) - Allan

has reacted accordingly and is now calling for a December cut and a reduced terminal (by 25bp

to 3.25%). Meanwhile the internal Labour noises have gotten louder overnight with talks of a

rebellion from Streeting on which Streeting himself has already poured cold water on - sorry

guys, there is no smoke without fire and after the impending manifesto break it is not only a

question of whether then economy can withstand squeeze but can Reeves and Starmer? Finally

Starmer has rejected contributing to a the joint defense fund with Europe potentially excluding

British companies from benefitting from the wave of European funds earmarked for defense –

this is a clear negative from growth prospects. So very simply, we are back to being short

pounds here, have a mixture of cable and EURGBP for now, GDP data dump tomorrow includes

IP which should be tainted by the JLR shocker while the full green light to add to shorts will be

soft price data next week (or some consistent RM involvement). 0.8750/70 is the risk point in

the cross, 0.8865/75 resistance while the 200d is the risk point in cable 1.3277, 1.3000/20 is

support.

JPY

Well I was expecting 154.50 to break but the fashion in which it did has raised some eyebrows

as it took a soft weekly ADP, lower yields and some chasing in the hole to do so. True to form,

we have since seen the MoF react, with Katayama raising the level with “one sided move”

language which puts the MoF on level 3/5 on our strat’s scale (5 is intervention) so still some

way to go folks before the fireworks go off. Hard to expect anything other than JPY to stay soft

especially on the crosses (fresh ATHs in EURJPY and CHFJPY yet again!) here as risk and

carry continue to dominate proceedings – hard to get with it at this juncture with the dam about

to break releasing so much news flow with the reopening so keeping it tactical for now. Next

level on the topside beyond the round number of 155 is 156.80/90