FX COT Update: GBP Record Short Position Now Fully Reversed

Oct 02, 2:29 pm
COT report_Sterling_ECB

EURUSD

USDCAD chart

Non-Commercials increased their net long positions in the Euro last week buying 25k contracts to take the total position to 88k contracts. Positioning adjustments in the single currency have been increasingly volatile over the last few weeks as traders have been adjusting their view in response to the ECB’s latest meeting, as well as various data releases and comments from ECB members.  The recent strength of EUR has proved a point of concerns

The recent strength of EUR has proved a point of concerns form some ECB members due to the negative impact on net exports, but growth in the eurozone continues to improve. The results of the German elections created some mild volatility last week with the CDU failing to gain an absolute majority and the far-right AfD party gaining seats in the Bundestag for the first time. However, the reaction was fairly limited and focus now turns to a discussion on the likely coalition which will be formed.

GBPUSD

Non-Commercials reduced their net short positions in Sterling last week and flipped net-long, buying 15k contracts to take the total position to 5k contracts. The record GBP short position that began building in response to the June 2016 Brexit referendum has now finally been reversed as traders have shifted their view in response to better data out of the UK and a hawkish shift by the BOE.

At their latest meeting, the bank noted that a rate hike will likely be appropriate over the coming months if the economy continues to perform as expected. Focus this week will be on a raft of PMI data sets, with traders keen to see how growth has been affected by the start of the Brexit negotiation process following a downward revision to the Q2 figure.

USDJPY

JPY chart

Non-Commercials increased their net short positions in the Japanese Yen last week selling 20k contracts to take the total position to -71k contracts. Last week’s adjustment was the largest week of selling in the Japanese Yen since the summer as flow return to broader fundamentals and away from the tensions between North Korea and the US. At their recent meeting, the BOJ reaffirmed their commitment to continuing with their easing program which runs QQE along with a focus on keeping JGB yields at 0%. With nearly all of the G10 central banks having taken a hawkish shift, the policy divergence has kept focus on further downside for the Yen.

USDCHF

Non-Commercials increased their net short positions in the Swiss Franc last week selling 0.3k contracts. Position adjustments and overall interest in the Franc has been very light over recent months as markets have been focused on the bigger themes taking stage elsewhere such as a hawkish shift in many G10 central banks, European politics and US politics. The recent period of uncertainty around North Korea failed to see much safe haven inflow into CHF with traders seemingly preferring to use the Yen

AUDUSD

AUD chart

Non-Commercials increased their net long position in the Australian Dollar last week buying 5k contracts to take the total position to 77k contracts. AUD demand continues to increase as traders anticipate the likelihood of a rate rise in the near term.  Focus this week will be on the RBA’s October rates meeting and while the bank is not expected to move on rates, the bank’s commentary is likely to be more upbeat following the continued improvement in the labour market. However, the bank is likely to once again reiterate the need for patience in normalising policy.

USDCAD

Non-Commercials increased their net long position in the Canadian Dollar last week buying a further 16k contracts to take the total position to 75k contracts. Despite the recent uptick in buying, expectations of an October hike moved lower last week in response to BOC governor Poloz’s comments which reaffirmed that there is no predetermined path on rate hikes and that the bank will remain data dependant.

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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.