BOJ Policymakers Warn Weak Yen Could Fuel Inflation Risks and Delay Rate Action 
Bank of England Expected to Hold Interest Rates at 3.75% as Inflation Remains Elevated 
Bank of Canada Holds Interest Rate at 2.25% Amid Trade and Global Uncertainty 
RBA Raises Interest Rates by 25 Basis Points as Inflation Pressures Persist 
Elon Musk’s Empire: SpaceX, Tesla, and xAI Merger Talks Spark Investor Debate 
ECB’s Cipollone Backs Digital Euro as Europe Pushes for Payment System Independence 
South Africa Eyes ECB Repo Lines as Inflation Eases and Rate Cuts Loom 
RBA Expected to Raise Interest Rates by 25 Basis Points in February, ANZ Forecast Says 
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.
