Friday's US payrolls came in at just 29,000 against a 90,000 consensus, and unemployment rose to 4.2%, which cut the odds of an October Fed hike from about 70% to below 20%. The dollar index still finished the week near 102.4, its highest since April 2025, so the dollar leg of our long USD/CAD and short GBP/USD is being carried by yields rather than by jobs data.
France's €43bn austerity budget did not calm the bond market, and the OAT-Bund spread widened past 140bp, its widest since 2012. The euro fell against the dollar for a fourth straight week and EUR/CHF dropped sharply, which puts direct pressure on the franc-funded leg of our long SGD/CHF.
Brent slipped toward $101.5 as the G7's 100-million-barrel stock release and a recovery in Gulf exports weighed on crude. Each dollar lower makes it harder for the Bank of Canada to defend the hikes its own curve still prices, which helps our long USD/CAD.
This cycle, the edge comes less from where policy rates sit and more from how badly some curves have mispriced their own central banks.
Three themes driving G10 FX
- Pricing gaps matter more than rate levels — Markets price about 80% odds of a BoE hike on 5 November but only about 20% for an RBA hike two days earlier, and gaps like that drive more of the edge than headline rate differentials.
- Positioning is at extremes — Leveraged CHF shorts are at the most extreme level in our sample, the JPY long sits at the 88th percentile and the sterling short is past its stretched threshold, so the most popular trades now carry real squeeze risk.
- The dollar's medium-term edge is fading — The Fed's dots stay flat at 4.1% through 2027 while other central banks keep tightening, so over 1–6 months the dollar's strength holds up only against CAD and CHF, the two weakest currencies in our ranking.
Our top 3 trades
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Long USD/CAD The Fed hiked while the BoC held for a seventh meeting, yet Canada's curve still prices hikes that 1.95% core inflation cannot justify. Carry: +163bp (tailwind, you are paid to hold) |
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Long SGD/CHF The MAS keeps the Singapore dollar appreciating, while the SNB sits at zero and its own forecast rejects the roughly 75bp of hikes Swiss markets still price. Carry: +192bp (tailwind, you are paid to hold) |
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Short GBP/USD UK growth of 1.4% trails the US at 2.1%, and gilts have priced UK Budget stress that spot sterling has not. Carry: +13bp for the short (tailwind, but negligible) |
On our radar
| Oct 7 | FOMC minutes (September meeting) | Affects: USD/CAD, GBP/USD |
| Oct 9 | Canada September Labour Force Survey | Affects: USD/CAD |
| Oct 14 | MAS Monetary Policy Statement + Singapore Q3 GDP | Affects: SGD/CHF |
| Oct 14 | US September CPI | Affects: GBP/USD, USD/CAD |
US CPI on 14 October has the most lopsided payoff: after the payrolls miss, core inflation needs to print 0.3% or more to bring back December hike pricing, while a 0.1% print would remove the dollar support behind our short GBP/USD and lower our conviction in long USD/CAD.
Carry snapshot
Carry is working, but almost entirely through the franc. All five of the best carry-to-volatility pairs borrow in CHF, while no yen cross pays enough because we expect BoJ hikes to give the carry back through a stronger yen. EUR/CHF fell 144 pips in two sessions at the start of the month, more than six months of forward drift, so we treat the 192bp on long SGD/CHF as a bonus, not a cushion, and stick to our stops.
Full analysis with all pair rankings, carry landscape, risk dashboard, and catalyst calendar available for Edge and Dossier members.