JPM FXMW Update FX FOMC

J P M O R G A N Global Markets Strategy 30 July 2026

FX FOMC post-mortem Staying long-USD despite renewed inflation risk premium

• Wednesday was a material setback for the dollar, but it’s not the end of the Global FX Strategy long-USD trade just yet. Patrick R Locke AC ( • While there were hawkish components at the outset and in prepared remarks, elements of the press conference reintroduced concerns around J.P. Morgan Securities LLC the Fed’s credibility in lowering inflation, according to our economists. James Nelligan • That manifested in a major twist steepening in 2s30s, which mirrored the ( aggressive USD sell-off through the press conference as FX embedded J.P. Morgan Securities plc credibility and inflation risk premium (Figure 1). S w D U p u d h n k m g 0 3 2 o itfsecra

Arindam Sandilya • This is consistent with the dollar’s behavior both in discrete episodes (July ( ) and more broadly, where lower short-end rates & higher long-end rates routinely result in USD weakness. JPMorgan Chase Bank, N.A., Singapore Branch Meera Chandan • Fed credibility concerns would favor currencies with rate sensitivity like ( SEK and pose spillover risks to currencies with beta to long end bonds like GBP. But this is not a go-with view and we remain short SEK. J.P. Morgan Securities plc

• The dollar does have offsets. We think the committee will act to ensure credibility with a hike in Dec; Sept is live and data-dependent. Short-end rates repricing has not eroded enough to really damage USD’s carry insulation. Iran is providing renewed ToT support. • We therefore stay long-USD vs a basket of G10 low-yielders (EUR, CHF, SEK, CAD, NZD). Figure 1: USD weakness matched the contours of 2s30s twist steepening LHS: 2s30s; RHS: DXY (inverted)

Source: J.P. Morgan, Bloomberg Finance L.P.

See page 5 for analyst certification and important disclosures.

Patrick R Locke AC ( Arindam Sandilya ( Global Markets Strategy JPMORGAN FX FOMC post-mortem J.P. Morgan Securities LLC 30 July 2026 James Nelligan ( Meera Chandan (

Inflation risk premium rears its head and drags USD lower - but the long-dollar trade still has other supports Wednesday was a material setback for USD, but it’s not the end of the long-dollar trade just yet. We saw upside risks to the dollar into the FOMC this week, reflecting the serial rise of hawkish Fedspeak in recent weeks and the subsequent potential for material dissents. The 2pm release delivered three dissents with hawkish prepared remarks (here, here), ostensibly meeting our dollar-bullish bar. Yet the dollar nevertheless sold off - in part reflecting very last-minute whispers about a hike actually being delivered, and accompanying last-minute demand for USD topside protection (Figure 2, Figure 3). d ,tilfrseaco O w D U C F S y u g k v b h n M p m F n O w C T d x y lti’rf-sJeach k p u o g M

Figure 2: USD topside demand has been positive the last few weeks Figure 3: The last week’s sharp repricing of July FOMC expectations into the FOMC, adding some tactical risk to the dollar from Fed also added tactical risk and positioning to the long-dollar trade underdelivery LHS: Priced hikes for July; RHS: DXY. Through 28 July. USD net options flow (calls less puts, notionals) (5Y z-score)

Source: J.P. Morgan, DTCC Source: J.P. Morgan

More problematic for the dollar, however, was the press conference that ushered in renewed institutional credibility concerns and attendant spikes in inflation risk premium for USD. The press conference saw the Chair 1) cast doubt on the future of PCE as the Fed’s inflation target, 2) fail to articulate how to achieve inflation targets, 3) provide only limited color on the nature of the dissents, and 4) place a considerable emphasis on the markets having repriced in the intra-meeting period. The net result of these “raise questions about the new chairs’s credibility in delivering lower inflation,” according to our economists (M. Feroli, That’s incredible!), and “reduced confidence in the Fed” per our rates strategists (J. Barry, Talk is cheap).

Consistent with this, the dollar sold off in parallel with the extraordinary twist steepening. As our US Rates Strategy colleagues point out, there was a +15bp end-to- end…