Newsletter · · Ashutosh Agarwal

G10 FX & The Carry Trade - Week of June 22, 2026: The Warsh Era Begins, and the Dollar Has Yield Again

G10 FX and carry newsletter for the week of June 22, 2026. A hawkish Warsh debut flipped the Street's house view bullish dollar and reset every G10 cross: the cleanest expression is now long USD/JPY toward 164 with the MoF on the sidelines, the yen and franc are the H2 funding legs of choice, and sterling has been demoted to a EUR/GBP cross trade.

G10 FX & The Carry Trade

Week of June 22, 2026: The Warsh Era Begins, and the Dollar Has Yield Again

There are weeks when the FX tape drifts, and weeks when a single meeting rewrites everyone's H2. This was the second kind. The first FOMC under Chair Kevin Warsh did not just hold, it produced a dot plot where nine officials now favour at least one hike, and the strategist community spun on a dime. JPMorgan's flagship FX call, "Bearish Dollar" since November, flipped to "Bullish Beta, Bullish Dollar." When the desk that owns the consensus changes its mind in public, you pay attention. The interesting part for this note is not the dollar itself, but what the regime change does to every G10 cross underneath it.

TL;DR

  • Hawkish Warsh = dollar with yield. EUR/USD tested sub-1.15 and the bears are now talking 1.12, even 1.10; USD/JPY ran to 161.81, a whisker from the 2024 high, with 164 to 165 in the crosshairs.
  • The funders are doing the work. The yen and the franc are the H2 funding legs of choice; the cleanest expression is dollar calls in USD/JPY, where option premiums are the most depressed in all of G10/EM relative to conviction.
  • Sterling is a sideshow priced through the cross. With the BoE hike call being scrapped across desks and Andy Burnham closing in on No. 10, the trade is EUR/GBP higher, not a GBP/USD level.

What's new

1. JPMorgan flips bullish dollar, and names a target. On At Any Rate ("Global FX: Bullish Beta, Bullish Dollar," Jun 19), Head of FX Strategy Meera Chandan pegged EUR/USD at ~1.12, with 1.10 live "if Fed hiking intensity increases." Her frame is what should worry euro longs: "US exceptionalism… showing up in multiple dimensions, including yield supremacy." The euro, she argued, simply offers "lack of yield, lack of growth." This is the difference between a tactical dollar bounce and a regime call, and JPM is making the regime call.

2. The yen is the trade everyone agrees on. MUFG's Derek Halpenny (FX Crosscurrents, Jun 19) had USD/JPY at 161.81 intraday, 14 pips from the 2024 high, and sees 165+ on a break of 161.95. Crucially, he does not expect the MoF to defend it: "there's definitely a risk that they could stand back and allow this level to break," with any intervention capped near ¥12trn and "perhaps foolish" at these levels. JPM's Japan strategist sees the same picture, lifting the probability on a long-held 164 target and noting USD/JPY tends to rise ~4.5% in the six months before a Fed first hike.

3. The vol desk says: do it with options. In JPM's 2H Vol Outlook ("Carry the Day, Vol the Tail," Jun 19), Arindam Sandilya made the sharpest point of the week: "Nowhere do we find option premiums to be as depressed in a currency where our macro team also shares the directional view… as dollar yen." Carry-to-vol across G10/EM is "still very favorable," and implied vol sits "about two sigma too low versus the global business cycle." Translation: you get paid to be long the dollar via cheap convexity rather than naked spot near intervention zones.

4. The lone hawk-on-EUR dissent. Not everyone bought the bearish-euro story. Nomura (The Week Ahead, Jun 19) moved more positive on EUR, with George Buckley and Dominic Bunning now forecasting three ECB hikes to 3.00%: "We have three rate hikes now from the ECB, taking us to 3%." Their logic: the ECB's own 1.75 to 2.50% neutral range leaves it below neutral with room to tighten. It is the cleanest contrarian euro long on the tape.

5. Sterling gets quietly downgraded. MUFG and Nomura both scrapped their BoE hike calls this week. Halpenny: the BoE "can probably stay on hold through this year" after two soft CPI prints, and with 1-month GBP vol at a record-low ~3%, he expects the break to favour EUR/GBP higher. JPM's rates desk (Scandi/BoE wrap-up, Jun 19) still pencils a hike "the latter part of this year" (~15bps priced Sep, ~35bps Dec) but sees "no significant increase in political or fiscal term premium… just yet," even with Burnham winning Makerfield and odds-on to be PM by the September conference.

The debate

The bull-dollar case is well-stocked: a credibly hawkish Warsh, US 2Y +11bps against European 10Y down 12 to 13bps post-FOMC (Marc Chandler, The KE Report, Jun 19, targeting DXY 102 to 102.5), and a yen the MoF may decline to defend. "The dollar needs a bigger premium… and that's exactly what was delivered this week," Chandler put it.

The other side is thinner but real, and it is a durability argument, not a direction-this-week one. Halpenny: "the scope for sustained US dollar appreciation is fairly limited… foreign investors' appetite for hedging US dollar exposures going forward will still be pretty strong," a ~7% US deficit through 2030 to 2031 and structural hedging demand cap the dollar even if it grinds higher now. Saxo's John Hardy (Saxo Market Call, Jun 18) flagged the tell: a long-end UST that rallied even as the dollar bid, "tempering" the move, either the market believes Warsh, or it is starting to price growth risk. And the euro-bull seat is occupied by Nomura's 3.00% ECB. Note who's saying what: these are sell-side strategists, not corporates. The only operator-flavoured voice this week was pundit Taylor Sohns of LifeGoal, who framed the carry as "free money, levered free money," with the Fed to BoJ 10Y gap halved to ~200bps but "still seismic." Useful color, not a desk's book.

Trades in play

  • Long USD/JPY via dollar calls / yen digitals, JPM's screened best-value dollar expression; lets you stay long the move without sitting in front of the MoF.
  • Long USD/CHF, geared through correlation structures (long USD/CHF + short GBP/USD + long GBP/CHF). CHF is JPM's preferred funder over the yen precisely because the SNB's "heightened willingness to intervene… creates some asymmetric properties" and there's no intervention-escalation tail like the yen's.
  • EUR/GBP higher, the consensus way to be short sterling without a GBP/USD view; resistance above 0.8700, H2 target 0.8800 to 0.8850 on an unfriendly UK budget.
  • Carry, but cheaply: HUF is the top carry-to-vol name in G10/EM (10-delta EUR/HUF puts as value despite crowding; long HUF / short SEK). Watch EUR/SEK 11.00, a "triple top" Hardy flags as the trigger for fresh SEK weakness after a dovish Riksbank hold at 1.75%.

Read-throughs

A higher USD/JPY with the MoF on the sidelines keeps the yen-funded carry basket alive and risk-supportive, but it rebuilds exactly the leveraged-short-yen positioning (now back at July-2024 levels) that detonated in August 2024; the offset, per Sohns, is that the US no longer carries an easing bias, so the double-compression that broke the trade last time is absent. On rates, the Bund/Italian rally vs the UST sell-off is the engine of the dollar move; the gilt back-up was Bund-sympathy and Iran/US headline noise, not a UK fiscal premium, yet. Yen and franc strength reversing removes a headwind for the Nikkei and for Swiss exporters, though the Swiss side is inference: the SNB and the Nestle/Roche/Novartis complex drew no airtime this week.

What changed

One thing, and it's the whole note: the Street's house dollar view flipped from bearish to bullish on the back of a hawkish Warsh debut. A week ago the modal call was a fading dollar into year-end; today it's yield supremacy and a 164 yen. The euro bulls have been reduced to a single contrarian seat (Nomura's 3.00% ECB), and sterling has been demoted to something you trade through the cross.