FX Markets Weekly Update: AI sentiment and the broadening FX footprint

J.P. Morgan Global FX Strategy Weekly Update: AI sentiment and the broadening FX footprint. Our recommended trading themes stay focused on: (i) procyclical/carry and commodity exposure - long AUD, NOK, GBP in DM; (ii) using the euro bloc as a funder; and (iii) funder RV - short EUR on crosses vs. the likes of CHF, JPY and SEK. In our note titled "Innovation Cycles, AI and the Dollar" published nearly a year ago, we concluded that the traditional wisdom that gains from innovations typically accrue to currencies of key technology "producers" may not necessarily hold this cycle as AI adoption would be global. A year on, there are initial signs that our hypothesis of a broader rather than localized FX impact from AI is being realized. We create an AI sentiment indicator using LLMs to rank currencies using J.P. Morgan research notes, central bank communications and news reports. The widely-accepted AI "producers" have the highest sentiment scores - USD in DM;