J.P.Morgan: Fall Looks To Be More USD Supportive

Late on Friday J.P.Morgan noted that last week saw "FX markets undergo a material corrective reversal and delivered further affirmation that the macro season is shifting from a summer supportive of grinding reflation trades, into a fall that is more USD-supportive & risk-threatening. We find that much of late-summer excess USD weakness has been unwound, but there is further scope for USD to selectively rebound, especially if the cyclical outlook deteriorates further. We have been flagging waning Euro area growth momentum, leading us to close residual Scandi longs last month and scale EUR shorts. Our risk bias on EUR has become more negative following the flash PMIs; stay short EUR/JPY and rotate into short EUR/USD from EUR/CAD intra-week. Long JPY remains a core position and is a tail risk hedge should the global recovery and risk sentiment wobble; we also buy a USD/NOK call spread to hedge this possibility. We stay short GBP on Brexit and growth concerns. We hold a market weight stance on EM FX in the GBI-EM Model portfolio. In EMEA EM, we remain market weight overall, with an RV stance across the region. In EM Asia FX, our core bullish CNY view stays intact but minding near-term risks ahead of the US election. The widely expected FTSE index inclusion is headline positive for the CNY. In Latam, we stay overweight riding out some recent volatility."