Smoke signals

Global FX weekly Smoke signals

G10 FX. No smoke without fire: quiet G10 FX masks looming policy risks in the US, FX Research Japan and the UK. Short EUR/USD, long JPY (vs. CHF & CAD), long GBPUSD forward vol. Global

EM FX. Triple trouble: Conflict, Trade tensions and El Nino to pressure EM FX. Stay Table of Contents short ZAR as key hedge, short EUR/CNH on trade tensions. Key views, forecasts and latest trades 2 G10 Themes Week ahead 3 GBP. Awaiting details on “fiscal flexibility” – we turn neutral on GBP. The View 4 G10 Themes 6 EUR: German fiscal roughly on track, slippage rising. Reforms are tentative good news. UK - Trading Places 6 G10 FX. Non-carry, non-USD opportunities in G10 FX – NZD crosses attractive. Germany: lots of caution with sprinkles of 7 optimism Sell CAD/JPY. BOC pricing overdone & USMCA uncertainty rising. Japan BoP improving. Crossing the Pond(s): G10 FX Opportunities 8 EM Themes outside the USD Short CAD/JPY 9 EUR/CNH. Enter 2M 7.55 EUR/CNH digital put on divergent trade cycle EM Themes 10 Asia FX. Asia FX Monthly – feeling the summer heat Enter 2M 7.55 EUR/CNH digital put 10 Asia FX– feeling the summer heat 11 LatAm FX. Second Half LatAm FX: Second half 12 EMFX. Quant EM – The Carry-Ons are Packed EMFX: The Carry-Ons Are Packed 13 Technical Strategy 15 Technical Strategy Trade Recommendations G10 16 Euro broke technical support and formed a bearish continuation pattern that implies Trade Recommendations EM 18 short-term downside to 1.1325 / 1/13 / 1.1240 while below 1.1436. World At A Glance Projections 20 Research Analysts 25

G10 FX Strategy MLI (UK) Claudio Piron Emerging Asia FI/FX Strategist Merrill Lynch (Singapore) Adarsh Sinha FX and Rates Strategist MLI (UK) See Team Page for List of Analysts

Trading ideas and investment strategies discussed herein may give rise to significant risk and are not suitable for all investors. Investors should have experience in relevant markets and the financial resources to absorb any losses arising from applying these ideas or strategies. BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 22 to 24. Analyst Certification on page 21.

Key views, forecasts and latest trades Michalis Rousakis Claudio Piron MLI (UK) Merrill Lynch (Singapore)

Exhibit 1: Our medium-term views G10 and EM FX medium-term views G10 We extended our bullish USD view and forecasts into 3Q, and we remain short EUR/USD: our constructive USD view was predicated on the yawning gap between US growth outperformance and rate differentials in early 2Q. This has narrowed, supporting USD, but there is likely further to run, especially under our base case of three Fed rate hikes this year. Positioning & sentiment have rapidly turned bullish dollar but are still well within historical extremes, according to our metrics. We revised down our YE ‘26 EURUSD forecast to 1.15 (previously 1.20), reflecting a reset higher in the dollar range, but keeping a more neutral medium-term stance vs. forwards. We are no longer bearish JPY as structural outflows moderate and hedging trends begin to shift. Elsewhere, we maintain a constructive bias for GBP and the Antipodeans by year- end, are neutral on SEK and CHF, and bearish on CAD and NOK. EM EM FX performance remains very mixed with Asia FX clearly underperforming with only CNY sustaining year-to-date gains. We now anticipate a firmer USD in H2 as US real rates remain above 2% and we anticipate three Fed hikes, and underperformance in THB and IDR. ZAR remains the best hedge given its high beta to the Iran situation. In Latam, BRL, despite its strong performance, remains cheap vs the major improvement in its terms of trade, and the same is true for NGN EMEA FX. Among CEE FX, HUF has substantially outperformed its terms of trade due to the elections but has more room. Source: BofA Global Research BofA GLOBAL RESEARCH

Our key forecasts Exhibit 2: Key BofA G10 and EM…