Macro / overnight

- Geopolitics still dominates — Iran/Gulf remains the only real driver and the market is fatigued from chasing conflicting headlines.

- US payrolls were solid enough to show the labor market is not rolling over, but the reaction faded quickly as macro focus snapped back to the Middle East.

- Into the latest 8pm EST deadline, the tone is very much lower risk, lower conviction, wait for clarity.

### Market tone

- Broadly:

  - lighter positioning

  - less appetite to initiate fresh risk

  - headline sensitivity remains extreme

- Core framework:

  - escalation risk keeps oil supported

  - that continues to pressure energy-importing currencies

  - but flow dynamics are distorting the simple macro read in spots, especially in EUR

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## FX themes by currency

### EUR

- EUR remains resilient, still holding the 1.15 handle despite higher energy and decent US data.

- That resilience suggests capital rotation / flow support is still helping the single currency.

- There is some temptation to look at medium-term EUR topside, but near term it still makes sense to stay patient ahead of the event risk.

- Takeaway: EUR is trading firmer than fundamentals alone would imply.

### GBP

- Sterling remains vulnerable in this environment.

- Geopolitical stress plus domestic UK political concerns are keeping it on the back foot.

- Preference is to buy EURGBP dips, especially toward 0.8600.

- Key levels:

  - Cable: $$1.3150 / 1.3350$$

  - EURGBP: $$0.8700 / 0.8750$$

- Takeaway: Prefer EUR over GBP on the cross.

### JPY

- JPY remains one of the clearer oil/geopolitical victims via the energy terms-of-trade channel.

- But USDJPY near 160–162 introduces obvious intervention risk.

- That makes it difficult to chase outright USDJPY upside aggressively, even if the broader macro still leans against JPY.

- If escalation worsens, an MoF response is possible, but if oil keeps surging the market will likely look to fade any large intervention-driven correction.

- Takeaway: JPY remains weak structurally, but intervention risk makes the trade more tactical.

### CHF

- Swiss reserve data points to likely SNB intervention last month.

- That is consistent with official rhetoric around resisting excessive franc strength.

- If we do get a constructive geopolitical turn, EURCHF should have room to lift.

- Takeaway: SNB appears active; CHF upside may be increasingly capped.

### AUD / NZD

- RBNZ is expected to hold at 2.25%.

- Focus will be on the statement and press conference, especially whether the bank maintains a dovish tone.

- Recent messaging suggests the RBNZ is willing to look through temporary energy-led inflation, which should keep NZD soft on a relative basis.

- AUDNZD remains biased higher if that dovish message is reinforced.

- Takeaway: NZD remains the cleaner relative underperformer.

### CAD

- USDCAD holding the 1.39 area as geopolitical stress underpins the dollar.

- Preference remains for short CAD exposure on crosses, with soft domestic growth and USMCA negotiation risk still part of the backdrop.

- Canadian labor data later in the week matters, but for now the Middle East remains the bigger driver.

- Takeaway: CAD still looks vulnerable, especially on crosses.

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## Positioning / trade color

- Risk has been trimmed back

- Reduced USDJPY short

- Holding a small short cable

- Took profit on USDCAD longs

- Nibbling back into long EURGBP

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## Levels and watchpoints

- EURUSD: holding 1.15

- GBPUSD: $$1.3150 / 1.3350$$

- EURGBP: $$0.8700 / 0.8750$$

- USDJPY: intervention-sensitive into 160/162

- USDCAD: around 1.39

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## What clients should hear this morning

- Don’t overtrade the noise before the deadline.

- The market is telling you that geopolitics and oil are still the dominant inputs.

- Best relative themes remain:

  - EUR resilience

  - GBP underperformance

  - NZD underperformance

  - CAD weakness on crosses

  - JPY weakness, but with intervention risk

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## Bottom line

House view this morning is cautious and tactical rather than high conviction: keep risk light, avoid forcing fresh positions ahead of the event, and focus on relative value themes rather than outright macro hero trades.