The 90-Day War

This weekly report analyzes the impact of the 90-day US-Iran conflict and UK political instability on G10 currencies. It maintains a bullish view on the USD while identifying trade opportunities like selling AUD/NZD.

Key Takeaways

• 1.The US-Iran war has reached its 90th day, with energy supply depletion and geopolitical uncertainty remaining major FX drivers.
• 2.US dollar exceptionalism remains intact, supported by a hawkish Fed outlook and its status as the ultimate safe-haven during geopolitical strife.
• 3.UK political turmoil following Labour's local election losses poses a significant risk to the GBP, with leadership scenarios ranging from a drop to 1.25 to a rise to 1.42 vs USD.

Table of Contents

• The 90-day war?
• FX and gold outlook
• G10 FX Portfolio
• FX Focus: The political drama in Westminster and the GBP
• The GBP before the crisis – oversold and under-owned
• Three stylized scenarios for the GBP
• Week ahead: key themes & trades
• FX Positioning Update
• FAST FX Fair Value Model Update
• FX Fair Value Model Update
• FX Risk Index
• Key releases in the week ahead
• Exchange rate forecasts
• Economic forecasts
• Interest rate forecasts

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