The single biggest event of the week landed on July 8, when the RBNZ surprised markets with a hawkish hike — a direct challenge to the NZD-short leg of our NZD/JPY position, which was gated against a squeeze scenario. On July 8 the June FOMC minutes reinforced the hawkish tilt, with ING's Francesco Pesole noting the importance of the Fed's hawkish shift for the dollar cannot be overstated, with conviction relying heavily on the median dot plot signalling a hike — a firming that pulled our tactical EUR/USD short back onside. Meanwhile the dollar changed hands near ¥162 into the week with USD/JPY grinding at the top of its range as the yen sat at 40-year lows, giving back roughly half the gains the yen clawed out on July 2, testing and rejecting the intervention wall that caps our USD/JPY long. And sterling extended its cycle-leading run — markets now fully price a 25bp BoE hike by year-end, up from 75% probability, as oil-driven inflation concerns build — deepening the pain on our GBP/USD short.
How our views are tracking
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Long SGD/CHF — thesis strengthened The cross ground back above entry as the Singapore dollar held firm and the franc softened, reversing last week's crack and reaffirming both the MAS appreciation slope and the SNB cap on franc strength. |
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Short CAD/JPY — thesis unchanged, carry drag Both structural legs remain valid but continue to cancel in this double-short cross, and the position has now bled three weeks of positive carry against the short — best expressed via options, not held spot. |
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Short NZD/JPY — thesis weakened The RBNZ's hawkish hike to 2.50% with a tightening bias directly squeezed the NZD-weak leg, pushing the position offside — though the medium-term disinflation path preserves the strategic short. |
Invalidator watch
No level-based invalidator has technically triggered, but the picture has bifurcated. The genuinely new risk is the RBNZ hike, which puts the NZD/JPY invalidator on watch even though the risk-off shock it was originally gated against has not fired; meanwhile the GBP/USD short is now functionally invalidated — the 1.3000 stop is still distant, but the driver has shifted from a transient dollar move to a durable BoE-hike repricing, with a sharp repricing of Bank of England tightening expectations over the past week leaving no near-term path back to profitability.
Next week
| Tue Jul 14 | US CPI (June) | Affects: EUR/USD, USD/JPY, GBP/USD |
| Wed Jul 15 | Bank of Canada + MPR | Affects: CAD/SGD, CAD/JPY |
| Thu Jul 16 | UK May GDP | Affects: GBP/USD |
| Mon Jul 20 | USTR Section 301 deadline | Affects: CAD, broad USD |
The July 14 US CPI is the immediate fulcrum and now carries even more weight after this week's hawkish repricing. With headline CPI having increased 4.2 percent over the last 12 months in May, a hot print would compound the dollar's recovery and extend our EUR/USD short toward target, while a soft print revives the July 2 dollar-bearish reaction and re-threatens both euro shorts. The July 15 Bank of Canada decision runs a close second — the Bank of Canada is not expected to follow the RBNZ with a rate hike, so a surprise either way is the swing factor for our CAD-short bucket.
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