News

📰 J.P. MORGAN ON POTENTIAL USD REACTION TO US ELECTION OUTCOMES J.P. Morgan: “We estimate that FX prices in 60-70% chance of a Trump victory. G10 election vols have rebounded pre-election, hitting or nearing new cycle highs in many cases, while election vol is 10-30% higher than at this point in 2020 and 2016. USD +5% on a Red Sweep and +1.5-2% on a Trump victory with Split Congress, while a Harris victory with Split Congress sees USD weaker. Positioning not an impediment to USD upside, and is just a slight tailwind for USD shorts in a Harris victory. Macro Trade Recommendations: Portfolio unchanged into event risk heavy, uncertain week. Maintain barbell strategy of optionalised election hedges (long USD/SEK, short EUR/NOK), yield convergence trades (long JPY vs CAD, EUR), broad euro funding and USD longs (short EUR/USD). Emerging Markets FX: MW EM FX keeping positions light. Our favourite election hedges are short CNH, PLN and newly CZK in options. Stay long TRY and ILS, which we expect to be resilient. FX Derivatives: Election premium rebounded to a cycle high. Scandies and Antipodeans lag. Premium roll-off should see 1M vol down by about 1.5vol pts. Trump post-election win trade: topside USD and vol ownership. For Harris: USD skew harvesting in CNH, SEK or NOK, and high-beta G10 USD-puts vs low-beta USD-puts RV. Technicals: EUR/USD rebounds from 2023-2024 trend line support. EUR/GBP attempts to base above longer-term range support. USD/JPY rally stalls near the 153.505 Jul 61.8% retrace and Aug-Sep pattern objective. USD/CNH triggers a short-term sell signal at the 7.14-7.146 resistance zone.”

November 4, 2024
Frank

J.P. MORGAN ON POTENTIAL USD REACTION TO US ELECTION OUTCOMES

J.P. Morgan: “We estimate that FX prices in 60-70% chance of a Trump victory. G10 election vols have rebounded pre-election, hitting or nearing new cycle highs in many cases, while election vol is 10-30% higher than at this point in 2020 and 2016. USD +5% on a Red Sweep and +1.5-2% on a Trump victory with Split Congress, while a Harris victory with Split Congress sees USD weaker. Positioning not an impediment to USD upside, and is just a slight tailwind for USD shorts in a Harris victory.
Macro Trade Recommendations: Portfolio unchanged into event risk heavy, uncertain week. Maintain barbell strategy of optionalised election hedges (long USD/SEK, short EUR/NOK), yield convergence trades (long JPY vs CAD, EUR), broad euro funding and USD longs (short EUR/USD).

Emerging Markets FX: MW EM FX keeping positions light. Our favourite election hedges are short CNH, PLN and newly CZK in options. Stay long TRY and ILS, which we expect to be resilient.
FX Derivatives: Election premium rebounded to a cycle high. Scandies and Antipodeans lag. Premium roll-off should see 1M vol down by about 1.5vol pts. Trump post-election win trade: topside USD and vol ownership. For Harris: USD skew harvesting in CNH, SEK or NOK, and high-beta G10 USD-puts vs low-beta USD-puts RV.

Technicals: EUR/USD rebounds from 2023-2024 trend line support. EUR/GBP attempts to base above longer-term range support. USD/JPY rally stalls near the 153.505 Jul 61.8% retrace and Aug-Sep pattern objective. USD/CNH triggers a short-term sell signal at the 7.14-7.146 resistance zone.”