Newsletter · · Ashutosh Agarwal

G10 FX - EUR, GBP, CHF & the Yen Carry - Week of June 25, 2026: Warsh Lights the Dollar; Yen Tests the MoF

A new Fed chair and a hawkish hold hand the dollar a fresh regime, the ECB-vs-BoE split reshapes EUR/GBP, the franc flips to a funder, and USD/JPY presses a silent MoF for the week of June 25, 2026.

G10 FX: EUR, GBP, CHF & the Yen Carry

Week of June 25, 2026: Warsh Lights the Dollar; Yen Tests the MoF

A new chair, a stripped-down statement, nine dots pointing up, and suddenly the whole G10 board re-racks around a strong dollar. The euro is fighting for 1.11, sterling is shrugging off a prime-ministerial reshuffle, the franc has flipped from haven to funder, and USD/JPY is a rounding error away from levels it last saw when "Plaza" meant something. This is the cleanest macro setup we've had in months. It is also, depending on whom you believe, a slow-motion accident.

TL;DR

  • Warsh's hawkish hold (9/18 dots up, guidance gone) is the dollar's engine: desks see 3% broad USD upside if the Fed delivers even a shallow hiking cycle.
  • The ECB-vs-BoE split is the new EUR/GBP trade: Nomura now wants the ECB at 3.00%, while MUFG and Nomura both dropped their BoE hikes. EUR/GBP, though, sits on record-low 3% vol.
  • USD/JPY ~¥161.9 with a silent MoF. The Street's line in the sand is ¥162; the consensus is that intervention there fails. Carry is intact until credit spreads crack, and they haven't.

What's new

The Fed handed the dollar a new regime. On The KE Report, Bannockburn's Marc Chandler framed the June FOMC as "a 15 to a 25, 26 basis point widening of the interest rate differential in the US's favour," with DXY targeting 102–102.5, though he warned dollar momentum is "stretched" and there's "too many good news" priced. JPMorgan's FX desk on At Any Rate, "Bullish Beta, Bullish Dollar" put a number on it: historically the dollar runs "5% upside in the six months leading up to the first hike," and "3% upside in the dollar here is a reasonable base case" on a ~75bp cycle.

Nomura went all-in on the ECB. On Nomura's The Week Ahead, "Meet the New Boss", chief Europe economist George Buckley added three hikes to take the ECB to 3.00%, arguing 2.25% "was probably still ... within the neutral range or possibly even ... towards the lower end of it," and that "if anything there are downside risks to our ECB call." That's the most hawkish ECB take on the tape, and the spine of Nomura's newly bullish euro view.

The BoE just lost its hawks, mostly. Two soft CPI prints flipped the consensus. MUFG's Derek Halpenny on the MUFG Global Markets Podcast said the data "makes us believe that the Bank of England can probably stay on hold through this year," and Buckley scrapped Nomura's remaining hikes outright: "they're not going to raise interest rates for an insurance hike." The lone holdout is JPMorgan's Francis Diamond on At Any Rate, "Scandi and BoE wrap-up", who still expects "a hike at some point in the latter part of this year" on delayed energy-shock pass-through.

The franc switched teams. Per John Hardy on Saxo's Market Call, the SNB spent its meeting "talking up intervention to prevent the Swiss franc from weakening", with "the lowest yield ... in G10," CHF is now a funder, not a haven: "this Swiss franc carry trade might have some legs." USD/CHF broke above ~0.8040 to new local highs.

Tokyo has gone quiet, and that's the story. USD/JPY sits ~20 pips under ¥161.95, "the modern high since the mid-1980s," yet, as Hardy noted on Saxo, 24 Jun, the MoF has "been very silent ... very unlike the last time." A reported phone call between finance minister Katayama and Treasury Secretary Besant is the new wildcard.

The debate

The dollar bulls have the tape. Rate gaps are widening, Warsh removed forward guidance (a structurally vol-positive regime shift), and JPMorgan's USD/JPY target of ¥164 now looks "likely ... in the second half." Carry pays: JPMorgan's 2H vol outlook insists "there is no specific or predictable reason why carry should stop," with HUF, ZAR, MXN and a rehabilitated INR as the high-yield longs, JPY and CHF as the funders.

"I think it's perhaps foolish to come in and intervene at these levels ... they could stand back and allow this level to break ... 165-ish." Derek Halpenny, MUFG

The other side is quieter but sharper. Halpenny himself warns "the scope for sustained US dollar appreciation is fairly limited" given a US deficit "running at seven-ish percent through until 2030"; hedging flows eventually re-bid the euro. On Forward Guidance, the macro panel laid out the unwind chain, "first it goes to FX, then ... yields ... then credit spreads widen," but noted high-yield spreads have "barely budged," so the reverse carry trade is latent, not active. And from the deep end, Jeff Snider and Steve Van Metre on Eurodollar University read Switzerland's near-zero 2Y yield as a global growth alarm, "it's not really about Switzerland," implying both ECB and BoJ hiking cycles are policy mistakes that reverse hard.

The genuinely two-sided question is the yen. JPMorgan's math is brutal: the MoF's "ultimate line in the sand" is ¥162, the war chest is ~¥12trn, and "given that [the] decline triggered by [the] last intervention was fully reversed in less than one month, any other ... intervention is ... likely to be insufficient." But a coordinated Katayama-Besant jawbone is a different animal. Hardy: "if they're both in there ... the downside air pocket can become very much larger."

Trades in play

JPMorgan's derivatives desk likes dollar calls on USD/JPY ("pretty well-priced") and GBP/CHF / USD/CHF topside (carry-to-vol "extremely elevated," USD/CHF risk reversals favouring dollar calls). On EM, the picks are EUR/HUF put spreads (deep 10-delta puts "quite cheap"), long ZAR at "2014-era vol levels," and MXN over CAD into the USMCA July-1 deadline. The defensive overlay: long ZAR / short NZD. With EUR/GBP one-month vol "a smidgen over 3% ... close to a record low" (Halpenny), cheap directional optionality on sterling crosses screens well into the UK political calendar.

Read-throughs

EUR/JPY: watch ¥185 → ¥190 if USD/JPY clears ¥161.95, then a reversal as the dollar reverts (MUFG). EUR/CHF: at a "tipping point" with the franc now a funder. GBP/EUR: sterling is rising through the leadership change. Andy Burnham is "on the fast track ... possibly as early as mid-July," but JPMorgan flags new Labour leaders "associated with higher borrowing and taxation," i.e. "higher gilt yields and ... a larger vol response in the FX side." Vol: JPMorgan calls VXY "two sigma too low versus the global business cycle," with a pickup penciled in toward Jackson Hole. GPIF: its annual report in the first week of July could "support both [the] JGB market and the yen," the one near-term catalyst the yen bears aren't pricing.

What changed

The week's real swing is the BoE: from a live hiking debate to on-hold-through-2026 at MUFG and Nomura in the space of two CPI prints. The other genuine shift is the franc's role reversal, from funding-but-still-respected haven to outright G10 carry funder as the SNB leans against strength. Everything else is the Warsh dollar doing what a Warsh dollar does.