The Federal Reserve hiked for the first time since 2023 on 16 September, voting 12-0 to lift the funds rate from 3.50%–3.75% to a 3.75%–4.00% target, and it was the projections rather than the decision that paid — the dollar notched its best day in three months, lifting the Bloomberg Dollar Spot Index 0.5%, cashing our short GBP/USD, short NZD/USD and short AUD/USD legs in a single session. The Bank of England then declined to rescue sterling: the MPC held Bank Rate at 3.75% on a 6-3 vote, with Greene, Mann and Pill again voting for an immediate rise to 4%, and GBP/USD fell to 1.3336, its lowest since July — the bilateral differential flipped against sterling exactly as our framework specified. The Bank of Japan delivered the hike and the wrong direction: it raised its key short-term rate 25bp to 1.25% in a 7-2 vote, the highest since April 1995, but signalled openness to further tightening while ultimately disappointing yen traders who wanted clearer guidance, and the yen sank — costing our short GBP/JPY and short NZD/JPY legs ground. Meanwhile the RBA's 29 September meeting is now priced at an 86% probability of a 25bp hike, which keeps the Australian leg of short GBP/AUD and long AUD/NZD working but leaves a hold as the asymmetric risk.
How our views are tracking
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Short GBP/USD — thesis strengthened The single mechanism the trade was built on — the Fed hiking while the BoE held, flipping the differential against sterling inside 24 hours — delivered on schedule at both dates, and the Pill risk we flagged last review can be retired for September. |
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Long EUR/GBP — thesis unchanged The euro rate leg keeps improving while sterling stays pinned, yet the cross has produced essentially nothing in nineteen days — the view is being validated in rates and denied in spot, which makes it unresolved rather than wrong. |
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Long SGD/CHF — thesis weakened Franc weakness extended against a rising dollar and the tactical objective is through, but the SNB invalidator remains triggered for a second consecutive review with a dated policy assessment now days away — this is our clearest partial-profit candidate. |
Invalidator watch
The most-cited threat across the entire book — a Fed hold on 16 September, named as an invalidator on six of our top ten trades — resolved favourably and is gone, and the BoE vote risk on EUR/GBP failed to materialise, merely deferring to the next meeting on 5 November. Against that, one invalidator armed itself: short GBP/JPY dies if the pair fails to reclaim a specific level within ten sessions of a delivered BoJ hike, the hike landed on 18 September, and the pair closed the wrong side of it — a live, dated test on our largest winner with the clock running into early October.
Next week
| Wed Sep 23 | Singapore August CPI | Affects: SGD/CHF, USD/SGD, EUR/SGD |
| Thu Sep 24 | SNB quarterly monetary policy assessment | Affects: SGD/CHF, USD/CHF |
| Tue Sep 29 | RBA Monetary Policy Board decision | Affects: GBP/AUD, AUD/NZD, AUD/USD |
| Wed Sep 30 | Australia CPI | Affects: GBP/AUD, AUD/NZD, AUD/USD |
The RBA is the one that matters: the SNB only assesses policy quarterly so Thursday is a language test, but with a hike near-fully discounted in Australia the asymmetry is inverted — a hold would likely see the Aussie fall sharply as priced hike probability unwinds, hitting short GBP/AUD and long AUD/NZD together while rescuing short AUD/USD. That internal tension is deliberate, and it resolves in one session either way.
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