FX COT Update: Sterling Net-Sold For First Time In 8 Weeks

Jun 06, 2:31 pm
COT report_Sterling_ECB

This data references the period ending Tuesday, May 30th

EURUSD

Non-Commercials increased their net long positions in the Euro last week buying a further 8k contracts to take the total position to 73k contracts. Market expectations for further tapering announcements continue to build ahead of the upcoming June ECB meeting, which is this week’s headline event. Positioning data reflects a clear shift n bias among institutional investors as long positions continue to grow. With expectations so high and positions continuing to build there is plenty of scope for disappointment if the ECB refrain from making any adjustments at this meeting and an unchanged or dovish statement is likely to fuel some long covering if EUR

GBPUSD

Non-Commercials increased their net short positions in Sterling last week selling a further 6k contracts to take the total position to -30k contracts. Last week’s sales of Sterling were the first time the UK currency has been net-sold on a weekly basis in the last two months. Uncertainty continues to build ahead of the UK elections this week as the latest polls continue to show a dramatic narrowing of the Conservative party’s lead over the Labour party. The average lead has now fallen to just 7% from 23% shortly after the election was announced in April. Momentum has fizzled out in Sterling as traders await the outcome of the elections.

USDJPY

Non-Commercials increased their net short positions in the Japanese Yen last week selling a further 1k contracts to take the total position to -52k contracts. The fairly muted position adjustment in the Japanese Yen reflects a better risk environment over recent weeks as manufacturing data continues to point to global growth and equity markets continue to rise.  Recent data continues to be positive with April Industrial Production expanding at4%, its quickest pace since 2011.

USDCHF

Non-Commercials reduced their net short positions in the Swiss Franc last week buying 1.2k contracts to take the total position to -18.5 contracts. Weekly adjustments in the currency, which is typically viewed as a safe haven, have been fairly muted over recent weeks reflecting a lack of directional catalysts in the market currently. SNB currency reserves and Swiss CPI will be the main data releases this week. The diminishing political risks in the eurozone are likely to see reduced currency reserves while CPI is forecast to remain weak.

AUDUSD

Non-Commercials increased their net long positions last week buying a further 0.5k contracts to take the total position to 3k contracts. The institutional long position has been significantly reduced over recent weeks mainly due to its nature as a China-proxy. A soft reading in the China Caixin PMI for May as well as the Moody’s credit downgrade of the country have both resulted in softer trading for AUD.

The RBA kept policy unchanged at their June meeting this week after data showed that Australia recorded the smallest trade deficit in 15 years. Interestingly, Australia is also about to achieve the record for the longest consecutive run of economic growth though many analysts expect Q2 growth to be negative, marking only the fourth quarter of negative growth since the 1990s.

USDCAD

Non-Commercials reduced their net short positions last week buying 1k contracts to take the take position to 98k contracts. This reduction in short positions comes after CAD short positions moved to record levels over the prior week. The Canadian housing market continues to fuel concerns for financial stability in the economy and the BOC’s Financial System Review this week will be closely watched. Any fresh concerns for the housing market on behalf of the bank will be taken as dovish ahead of the next BOC meeting. The key data release this week will be the employment report due to be released on Friday.

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With over 6 years’ experience analysing currency markets, James is now a well-known industry analyst focusing on price action trading and fundamental drivers. Beginning as a private retail trader, James developed a strong interest in understanding the fundamental aspect of the market before pursuing technical trading capabilities which he now uses to identify opportunities over a short-term horizon. Alongside his market experience, James is also IMC certified having achieved the qualification to help further his understanding not only of the markets but the industry as a whole. James has a strong interest in both fundamentals and technicals and uses both forms of analysis in generating and executing trade ideas, with trades generally lasting from a few hours to a few days.