Morgan Stanley: Fed Rate Cuts Still on Track Despite Oil-Driven Inflation 
Australia Bans Card Payment Surcharges Starting October 2025 
Bank of Korea Nominee Shin Hyun-song Signals Possible Rate Hike Amid Middle East Inflation Fears 
Bank of Japan Eyes Further Rate Hikes Amid Middle East Tensions and Inflation Pressures 
Japan Inflation Expectations Rise as BOJ Rate Hike Timing Faces Uncertainty 
Bank of Japan's Ueda Flags Low Real Interest Rates as Key Factor in Rate Hike Timing 
RBI Clamps Down on Rupee NDF Activity, Banks Face Steeper Losses 
Citigroup Delays Fed Rate Cut Forecast Amid Strong Jobs Data and Inflation Concerns 
Bank of Japan Governor Signals Accommodative Stance Amid Negative Real Rates 
Morgan Stanley Warns Against Overestimating EV Demand Boost from Rising Oil Prices 
We stay short GBPUSD because interest rate based valuations are even more stretched than USDCAD (we expect BoE hawks to be caged by an economy that is finally starting to cool), but once again reduce the directionality to the USD by opening a complimentary long position in EURGBP through options given the depressed level of volatility (2m EURGBP vols are 0.9 pts below their 6m average despite the French premium).
We remain short EUR on a handful of European crosses, but only where we believe local currency factors are bullish and justify currency appreciation even in the absence of a French political shock, namely CHF, SEK and CZK.
In the bigger picture, we are inclined to position for macroeconomic normalization in the euro, and the portfolio remains implicitly positioned along these lines through long positions in European currencies versus the dollar bloc (USDCHF and NZDSEK).
The addition of EURGBP to the portfolio augments the overall beta to a euro recovery (we believe that EURGBP would re-price much more on a Macron victory than EURCHF would, for instance).
Finally, we unwind a short volatility position in EURCHF given the substantial cooling of tail risk in the last few weeks both in ATMs and risk reversals.
