Here is our FX Blueprint

FX Blueprint for winter – Calm in the storm

FX has remained calm despite huge moves in commodities and rates this year. We argue this can persist into year end with many 2026 themes remaining intact. First, we see the dollar extending its slow but steady descent against CNY, while JPY continues its recent outperformance on crosses. Surplus Asia currencies remain the biggest valuation outliers in global FX. Second, we still see EUR/USD stuck: resilient global growth and sizeable USD tail risks argue against further euro weakness, but Fed hikes and high energy cap the topside. Third, we still like carry, but are becoming more selective compared to our bullishness throughout the year. With positioning more stretched and real rates in EM compressing against the USD, we have for the first time in a while added some selective USD/EM longs to the portfolio. Whether the doves of peace arrive in the Middle East by year end may ultimately determine whether that caution pays off.

Theme #1: Tight Club - neutral EUR/USD Theme #2: And Yen there was one - sell EUR/JPY Theme #3: Wonderfall - sell GBP TWI Theme #4: Don’t be crude - sell EUR/CHF, buy EUR/NOK Theme #5: I wanna be Audored - buy AUD/USD, sell NZD/SEK Theme #6: Canada dry - buy AUD/CAD Theme #7: Time to fade 'em - buy USD/PLN, buy USD/ILS Theme #8: Yuan more time, chip chip hooray - sell USD/CNH, sell USD/TWD Theme #9: Sweet pisco, tequila sour - buy USD/MXN, buy BRL/COP, sell USD/PEN Theme #10: Ice on fire - sell EUR/ISK Theme #11: Steppe up - buy UZS/USD, buy KZT/USD Theme #12: Cu up there - buy copper Theme #13: Gamma mia - buy NZD/USD, GBP/USD and gold vols

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