Looking at the recent response of the USD to Friday's NFP figures and the BLS revisions from yesterday, it's clear that while the USD has decreased, the response has been somewhat subdued. Following the data release yesterday, there was noticeable USD demand from both hedge funds and corporates. My outlook remains bearish on the USD, though I've significantly moderated this stance as we near key inflation indicators from the US, beginning with today's PPI report. I've shifted my focus to long positions in AUD against other currencies, as the AUD should continue to receive support from a central bank that is less dovish compared to others. This aligns with my long-standing belief that currencies with fiscal backing will perform better, and this perspective is beginning to take hold. From a technical standpoint, the situation is also becoming compelling; GBPAUD is currently testing its 200-day moving average at 2.0485, while EURAUD has dropped below its 100-day average at 1.7766, which has historically been a reliable directional indicator. EURUSD has been challenging to maintain over the past several weeks, stuck in a clearly defined range for the last six weeks, leading to a reduction in our engagement. However, buying on dips remains our primary strategy, while a drop below 1.1580/1.1600 would necessitate a short-term reassessment. Additionally, we must closely monitor any further developments in the region following Poland's recent downing of Russian drones overnight, although the euro has managed to withstand these events thus far, with today's decline attributed to flow at 08:00.

The recent revisions from the BLS have been quite revealing, yet the market has not reacted by pricing in further actions from the Fed, mainly due to concerns that the current situation is already well-assessed (with three rate cuts anticipated by year-end) and that the break-even NFP numbers must be even lower. The USD has had difficulties sustaining a decline alongside movements in fixed income and now seems to be stalling at the lower end of its range. This raises the risk of continued consolidation, especially given the growing tensions in the Middle East and Russia complicating matters. Consequently, we've adjusted our position on USD shorts to a more cautious stance as we prepare for PPI today and CPI tomorrow. In the UK, there isn't much new information; the media is spotlighting Starmer's "budget board," but it appears to just be a label for last week's reshuffle that weakened Reeves' position. Our perspective remains unchanged; we are still looking to decrease our GBP shorts and aiming for more favorable levels to purchase EURGBP. Despite hedge funds buying GBP for the second consecutive day yesterday, this was countered by corporate supply. The cable is still being characterized by the 1.34/1.36 range following yesterday's failed attempt at the upper range, while the cross remains within 0.86/0.87.

I keep mentioning that USDJPY should primarily reflect the USD rather than Japan, so it was unexpected to see the BoJ news impacting the USD during London morning trading yesterday. There was no major surprise for me; Ueda is still maintaining his slow pace and consistently indicates Q4 of this year. BoJ rate hikes had been ruled out due to the political chaos within the LDP, but have now rebounded to around 16 basis points by year-end, although the JPY had already diminished the effect of the political news, leaving limited potential for a rally. The BLS revision's USD rebound has contributed to the notable reversal in USDJPY, which currently appears technically unfavorable with a rejection of the cloud bottom at 146.52 today and a persistent lack of a strong close below the 50-day moving average. DHF and SHF were aggressive buyers of JPY during the London morning session, but their buying pressure reversed with price movements, subsequently leading SHF to become net sellers for the day, while DHF recorded a z-score of 1. Meanwhile, local traders were absent from our franchise. We remain on the sidelines ahead of the upcoming PPI and CPI releases, as the 200-day moving average at 148.80 continues to set the upper limit.