while a soft print would corroborate the weaker US payrolls release in the context of precariously-long dollar positioning. Alongside growth exceptionalism, the upturn in US CPI has been crucial for the dollar and FX more broadly this year. With the exceptionally-hot (and seasonally-distort-ed) January release falling out of the 3m rolling window next week, we’ll have a better sense on the durability of sticky US inflation. A hot print will challenge market pricing that has brought forward Fed cut expectations since payrolls, while a soft print risks a serious liquidation of USD length, not unlike what happened in 4Q˖22 and 4Q˖23 when soft CPI releases coincided with elevated USD levels and long positioning. Yet, while the dollar would no doubt come under pressure on a soft print, there is reason to believe that the downturn may be more contained than those two prior episodes, reflecting 1) less overall USD appreciation in the run-up and 2) less uncertainty around Fed future prospects (hikes were much higher probabilities during those episodes, so more depricing to be had)- J.P. Morgan FX Strategy
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