JPM FX Outlook

Meera Chandan AC ( Ikue Saito ( Global Markets Strategy JPMORGAN J.P. Morgan Securities plc JPMorgan Chase Bank, N.A., Singapore Branch 04 September 2026 Junya Tanase ( JPMorgan Securities Japan Co., Ltd.

FX Outlook Figure 1: The dollar is undershooting 3-4% relative to rate spreads

Leaning into bullish USD trades (again) • We had advised against the USD-bearish/ debasement narrative following Treasury buybacks; Fed Chair Warsh’s hawkish delivery and firm employment were positives, but the lack of FX follow-through has disap- pointed. • Cheap USD valuations and US resiliency prompts us to lean more aggressively into the dollar bullish view we have maintained since mid-May; we re-initiate USD longs vs. low yielders (SEK, CAD). • We acknowledge there are several counter-arguments to the bullish dollar view, but we lay out why a bearish dollar view is without merit… Source: J.P. Morgan.

• … with a range-bound outlook more defensible. Figure 2: Payrolls has provided a partial catalyst for USD strength and u-rate is tracking 0.2%pts below the FOMC's year-end forecast • Japan domestic policy is on the move with GPIF and BoJ in play; we are tactically bullish yen given US vigi- lance, but medium-term cautious as policy non-delivery will result in an unwind. • Next two weeks: US CPI (key), ECB (hawkish but won’t move the needle on EUR longer-term), FOMC, BoJ, BoE.

A hollow victory, but we lean into the bull- ish USD view again... We had advised against leaning into the USD-bearish/ debasement narrative following the US Treasury buyback story; we were vindicated by Fed Chair Warsh’s hawkish Source: J.P. Morgan, Bloomberg Finance L.P.

Jackson Hole delivery, but this outcome still rang hollow There are several counter-arguments to the given the lack of FX follow-through. The broad dollar index barely bounced by 0.5% following the Warsh JH speech, and bullish USD view... was trading at the bottom end of its 4-year range prior to the Our bullish USD view notwithstanding, several counter payrolls. The dollar is still undershooting rates / Fed re-pric- arguments plague our minds. These include: ing substantively (Figure 1), which is what has given us a dol- T litr-seah d o u n g 3 4 v p %

lar-bullish bias, but ultimately the data needs to provide the • Markets are already well-priced for the Fed tighten- catalyst for the dollar to “mean revert”; today’s payrolls ing, with just under three hikes cumulatively in the next report provides at least a partial catalyst given the bounce in year (Figure 3); how much more upside is there? Real d tlifr-ecau h b k o p n g v y F B m …

headline payrolls and the still tight u-rate (4.1% vs. FOMC policy rates priced into markets are approaching 2%, con- forecast of 4.3%; Figure 2). Even though the CPI report '.litrf-saecy g U o h p v d n M % O w D u k 0 2 b P S F C sistent with our current US growth forecasts (Figure 4). ,itlrfseachpoydnkg2uS U w m % …

next Friday should ultimately be key for the Sep FOMC And if the upside is limited and Fed hikes are mostly meeting, the lack of reaction in the dollar today and the priced, is there any legitimate reason why the dollar ongoing undershoot prompt us to lean more aggressively undershoot should mean revert now when the bulk of the into the USD bullish view we adopted in mid-May; we re- re-pricing (from cuts of 150bp to ~65bp of hikes) is initiate USD longs vs. low yielders like SEK and CAD (see already over? Trade Recommendations).

Meera Chandan AC ( Ikue Saito ( Global Markets Strategy JPMORGAN FX Outlook J.P. Morgan Securities plc JPMorgan Chase Bank, N.A., Singapore Branch 04 September 2026 Junya Tanase ( JPMorgan Securities Japan Co., Ltd.

Figure 3: But the bulk of Fed re-pricing might have already occurred… Figure 5: Some factors (energy on conflict, food prices on el nino) are driving inflation up everywhere...

Figure 4: …with real policy rates priced into markets approaching 2%, consistent with our current US growth forecasts Based on OIS and inflation swap rates; %

Figure 6: ...and many central banks ex-US are already hiking or expected to hike further % of global central banks hiking rates (3m lookback); dotted is J.P. Morgan Economics forecast

• Moreover…