FX markets are not quite asleep, but definitely not awake
highlights
Hypnagogia
Current Views
Flat
FX
Currency markets are in a bit of an interstitial or hypnagogic state here as dreams of a continuing USD bear market have faded while a new theme fails to gain market consciousness. We tried the Takaichi trade for a bit, but that feels stale, and Fed pricing for two full cuts remains unwavering due to the data blackout.
Friday’s CPI is the key moment, so perhaps we get a quiet start to the week as equities chop around, the AI Capex story feels kind of stale but not yet past expiry, and the credit fear story does not feel like it has legs.
With SOFR way back down today (back to 4.18 from 4.30) we can watch JEF stock as a canary for the broader credit fears and lender fraud story. While the move lower in Jefferies’ stock has been brutal, it still trades well above the April lows.
EURCHF is mildly interesting as we push down towards levels where the SNB is likely to get involved—and this is happening as month-end approaches. Other than the flash crash after the SNB dropped the floor in 2015, 0.9205 is the all-time low in EURCHF and you can see in the next chart that we have bounced off the 0.9205/0.9220 level four times in the past two years.
And here’s how EURCHF performs on the last day of the month, as repatriation and current account flows dominate the price action.
Today is only the 20th of October, but it will be interesting to watch this 0.9205/0.9220 level as month-end nears.
State Street is seeing rapid unwinds of large EUR longs, something that doesn’t happen too often and has led to large EURUSD losses in the past. The sample size is tiny, but given the next section of am/FX is the positioning report, this observation out of Boston feels relevant.
Our positioning data continues to oscillate around flat as the market refuses to commit. The US data blackout continues, the November 26th budget in the UK fails to generate any excitement, and nobody seems to care that the Supreme Court will begin to hear arguments on the legality of the Trump tariffs starting November 5. Fed policy looks to be on autopilot for two cuts this year, and while momentum in CAD and NZD is strongly negative, excitement levels around those currencies remain muted.
G10 FX Positioning and Momentum Scores
Some 150s in USDJPY and some 1.1650s in EURUSD this week, but nothing world stopping.
Final Thoughts
- SOFR dropped back down 12bps as the spike higher last week looks like a one-off abberation related to tax payments, not a broader sign of tightening liquidity.
- Summary of China’s latest 5-year plan, via Tim Power. The “Ice and Snow Economy”!
https://english.news.cn/20251020/07ac733f340f4851b27594257f557a9f/c.html
- Nice chart from Torsten Slok that explains why NVDA is unchanged since August while RGTI keeps on trucking.
- “There are 19,000 private equity funds in the US. There are 14,000 McDonald’s in the US. How are there more private equity funds than McDonald’s? That’s actually crazy, right?” KKR & Co. partner Alisa Wood said Wednesday at Bloomberg’s Women, Money and Power event in London. “Capital coming back is really important. The mark-to-market paper gains only take you so far.”
Have an ordinary week.
Trading calendar for the week of October 20, 2025
Related quote from S. Bose:
“It is easy to optimize for your kids’ success. It is much harder—and more important—to optimize for their happiness.”
