# G10 FX - Week of May 31, 2026: JPMorgan Calls Time on the Euro Rally > G10 FX newsletter for May 24–31, 2026. JPMorgan's FX desk turns high-conviction short EUR/USD while sterling, the Swissie and the yen barely register on tape, leaving one house's dollar-bull call as the loudest voice of the week. ## G10 FX: EUR, GBP, CHF & the Yen Carry ### Week of May 24–31, 2026 --- ```request-access variant: ghost heading: Want this kind of synthesis on your own coverage? buttonText: Request access ``` This was supposed to be the year the dollar quietly faded: ECB nearly done cutting, BoE stuck high, Tokyo with its finger on the trigger. Then JPMorgan walked onto its own podcast on Thursday and politely informed the market that the euro is now a high-conviction short. The other three majors barely showed up on tape this week, which is itself a story. --- ## TL;DR - **JPM's FX team turned firmly bearish EUR/USD.** Short-term fair-value box: **1.08–1.14**. A roughly 50bp real-rate shift back to the dollar, the seventh straight eurozone growth downgrade, and a French Q1 contraction did the work. - **Carry conditions are still green, but the cushion is paper-thin.** Aggregate FX vol below 6.5, post-COVID lows, headroom maybe one vol point. JPM wants AUD/JPY expressed in options, not spot. - **Sterling, Swissie and yen barely showed up on tape.** No SNB intervention chatter, no MoF tape-bomb dissection, only a passing EUR/GBP skew aside on cable. Read the silence as a signal, not a thesis. --- ## What's New **The euro's pivot is now JPMorgan's house view.** On JPMorgan At Any Rate (May 29), Meera Chandan (Co-Head of FX Strategy, London) called EUR/USD weakness *"entrenched,"* with JPM's short-term fair-value model now at **1.08–1.14**. The catalysts she stacked were unusually clean: stagflationary European PMIs ("output measures down, price measures up"), seven straight eurozone growth downgrades, and roughly 50bp of real-rate differentials shifting back toward the dollar. Her line worth keeping: > *"It just doesn't compute that EUR/USD hasn't really broken out of its Jan/Feb range, even though you've seen a 40%, 45% increase in Brent and gas prices… almost 50 basis point narrowing in the real yield differentials between Europe and the US."* (Meera Chandan) That sentence is the bear case in a box. **France is doing the bears no favors.** Same episode, host **Pat Locke** flagged the May 29 French Q1 GDP print as a contraction and called French PMIs "terrible," noting JPM's European activity surprise indices have been negative for roughly 2.5 months while the US is neutral-to-positive. None of that is news to anyone watching Paris, but it gives the bearish-EUR turn a country-composition story, not just a macro one. **The dollar is "2% cheap" to real rates.** Locke argued DXY has decoupled from the US real-rate move and has catch-up to do. His preferred expressions: short EUR/USD and long USD/CAD with a target of **1.41–1.4150**. He also called out two binary June catalysts: a third consecutive US payrolls beat (*"would be material… US exceptionalism shot in the arm"*) and **Kevin Walsh's first FOMC meeting as Fed chair**, with Fed-speak skewing "increasingly hawkish." **Carry still pays, but the vol cushion is one point thick.** **Ladislav Jankovic** (Senior FX Vol Strategist) put aggregate FX implied vol below 6.5 ("post-COVID lows last seen in 2019/early 2020"), with VIX under 16 and rates vols compressing too. His framing: still *"very, very supportive of carry,"* but at most one vol point of further compression is available. Honest read: realized vol is finding a floor, and risk-reward on running carry naked is deteriorating even as the trade keeps printing. **AUD/JPY is the cleanest cross-yen, but optionalize it.** Jankovic specifically named **AUD/JPY** as an interesting cross-yen carry expression *"at this level of vols,"* and pointedly said to **optionalize** it rather than run it in spot. In a week with no actual MoF or BoJ chatter on tape, this was the closest thing to an August-2024-redux hedge framework anyone voiced. He also flagged elevated **EUR/GBP skew** that was already wide before recent UK political stress, a structural fade candidate via options, not a directional cable call. **RBNZ moved the high-yield leg forward.** **Arindam Sandilya** (Co-Head of FX Strategy, Singapore) said the RBNZ came in "a little bit more hawkish than expected," prompting JPM to bring forward NZD hike expectations to **100bp of hikes starting July 2026**. NZD outperformed on the week. For the G10 carry hierarchy, that's a meaningful upgrade of the high-yielder leg, particularly against JPY and CHF funders. --- ```request-access variant: inline heading: Want this kind of synthesis on your own coverage? buttonText: Request access ``` ## The Debate I'd steel-man both sides, but I have to be honest about what the week's tape actually carried. **The bear-EUR / bull-USD camp** is the only camp that walked into the studio. JPM's argument is clean and reinforcing: stagflationary European data, French contraction, real-rate differentials shifting roughly 50bp toward the dollar, the dollar trading 2% cheap to those real rates, and US data into June (payrolls, Walsh) skewed to widen the gap. EUR/USD fair value 1.08–1.14, USD/CAD long to 1.41–1.4150, dollar exceptionalism extended into summer. **The "euro to 1.20, cable to 1.40, carry still pays as the dollar fades" camp**, the structural ECB-done-cutting / BoE-stuck-high / SNB-and-Tokyo-quietly-tightening view, **did not get voiced on the podcasts we follow this week**. Same goes for the "UK gilt accident makes sterling the G10 short" and "BoJ hike plus a risk wobble triggers a violent USD/JPY unwind back through 140" tail cases. Those are real debates; the strategists who'd make them just didn't publish to the pod stream in this window. Read JPM's call as the highest-conviction G10 view on the recorder this week, not as cross-house consensus. One coordinated firm-wide message, however well-argued, is not the market. --- ## The Trades in Play The actionable lines on the tape, in conviction order, all from the same JPM episode, which means you're sizing one house's confidence, not corroborated consensus: - **Short EUR/USD.** Fair value 1.08–1.14; payrolls and Walsh's first FOMC are the near-term tells. - **Long USD/CAD, 1.41–1.4150.** Locke's cleanest dollar expression. Layer in a **July-1 USMCA-review** option overlay if you want the tail (Jankovic's tip). - **AUD/JPY via options, not spot.** Carry's still on, but the realized-vol floor plus August-2024 muscle memory means you pay for the right tail, you don't sell it. - **Fade EUR/GBP skew** as a relative-value vol expression. Not a directional cable call. --- ```request-access variant: inline heading: Want this kind of synthesis on your own coverage? buttonText: Request access ``` ## Read-Throughs If JPM is right and the real-rate gap keeps tilting dollar-ward, the natural follow-ons: - **Bunds underperform Treasuries** as the differential widens back out. - **EUR/JPY drifts heavier**, the EUR leg does some of the work the funder used to do alone. - **European exporters get a small FX offset** to the activity slowdown. - **No Swiss read-through anyone wants to underwrite this week.** With CHF near multi-year highs and Swiss CPI flirting with deflation, the SNB-intervention question hangs over Nestle, Roche, Novartis, Swatch, Richemont, and ABB, but nobody on tape touched it. Worth keeping a finger on for next week. The bigger asymmetric tail is the one nobody voiced: with aggregate FX vol pinned at post-COVID lows and VIX under 16, the global carry book is sized for a regime it is already at the bottom of. AUD/JPY in options is one way to internalize that. So is buying VIX into June payrolls if you don't already have it. --- ## What Changed Three weeks ago, "the euro grinds higher to 1.18–1.24" was a reasonable consensus framing. This week, the largest US bank's FX desk politely turned that into a short. That's not a regime change, yet. But it's the kind of shift that, if anyone outside 270 Park Avenue corroborates next week, becomes one. --- ## Sources - [JPMorgan At Any Rate, *Global FX: Bearish EUR factors intensify, USD decouples from real rates, and an update on low FX vols* (May 29, 2026)](http://url7324.matterfact.com/ls/click?upn=u001.idHmPrr2Geh7KYLAsTy7NkrIVb-2FgA4pmf2rMXQwGcOjXY14Oo-2FJarDHi9jQrsIeSM4oNogOKS-2Fq7Jhh6gWj0OGwtvk0HmzGDw45fy7aqTMbfx0If5eE2n6qecOMqzlTYQ1JGUJDobL3WZJ9i2f-2FhNw-3D-3DFMPl_7mLGwmUci-2BLaXswv9WX1yTgqn3Wad-2FotHhzHgSNAZbWxc4uFTDNZzZwgOp2pxJDiCG6PoIeRn-2BdSWMOICwdv7MHorEiq5TertrSnHKBVcVoqtKQ3lHP-2B-2FPLm4TJlzz4LsPJq8-2Bzz-2Bd47-2FBqjs8h3Zxp18nO7-2FgotWmRp-2FMEpyWGHM7NuJL0Nkd0GzJMYkNeLdmU2rN78y4AJAjmbI78PXA-3D-3D) ```request-access variant: banner heading: Run your own corpus. description: matterfact is deployed with select institutional partners. Request access to run it on your own coverage. buttonText: Request access ```