FX COT Update: EUR Shorts Build Ahead Of ECB

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This data references the week ending August 30th

EURUSD

Non Commercials increased their net short positions in the Euro selling a further 5k contracts last week taking the total position to SHORT 82k contracts. The resumption of selling in the Euro comes ahead do the European Central Bank’s September rates decision this week. Following the rather neutral tone to the bank’s July statement, traders had paired back easing expectations though some analysts are expecting that the bank will add to their current easing program. Flash August CPI estimated came in just below expectations at 0.2% vs. 0.3% on the headline and 0.8% vs. 0.9% on the core reading.

GBPUSD

Non Commercials reduced their net short positions in Sterling last week buying 2.5k contracts to take the total position to SHORT 92k contracts. This reduction in short positioning in Sterling partly reflects the extreme levels to which shorts have built over recent months but is also a function of the market’s reaction to recent positive UK data which has continued to defy the bearish forecasts made pre-Brexit. August CPI came in higher than expected at 0.6% vs. 0.5% whilst Manufacturing, which was expected to have suffered sharply in the wake of Brexit, rose to 53.3 from July’s 48.3 reading highlighting the resilience of the UK economy and softening investor expectations for further BOE easing.

USDJPY

Non Commercials increased their net long positions in Japanese Yen last week buying a further 3.4k contracts to take the total position to LONG 64k contracts. The Japanese Yen has continued to see investor inflow despite the broad risk on tone with which markets have been trading in recent weeks. The BOJ’s latest easing efforts proved futile in terms of dampening JPY strength, and the subsequent announcement of a Government fiscal stimulus packages have proven equally impotent. In comments made during a press conference today, BOJ chief Kuroda noted that “Even within the current framework, there is ample room for further monetary easing … and other new ideas should not be off the table”.

USDCHF

Non Commercials increased their net long positions in the Swiss Franc last week buying a further 6.3k contracts to take the total position to LONG 8k contracts. This aggressive buying in Swiss Franc reflects a common dynamic which plagued markets this year which is the counter-intuitive movement of currencies when compared with the actions of their respective central banks. The SNB is seen as running out of options and having already exhausted many routes the Franc continues to appreciate. Key domestic data focus this week is Q2 GDP and August CPI.

AUDUSD

Non Commercials increased their net long positions in the Australian Dollar last week buying a further 0.2k contracts to take the total position to LONG 43k contracts. The continued demand for the Australian Dollar reflects the risk-positive tone with which markets have been trading in the wake of Brexit. The RBA’s recent rate cut failed to deliver a lower rate and with AUD still providing a comparatively high yield in the G10 space, was likely used as an entry point for longer term players. Focus this week will be on a raft of key China data with CPI the headline print later in the week.

USDCAD

Non Commercials increased their net long positions in the Canadian Dollar last week buying a further 5.6k contracts to take the total position to LONG 22k contracts. As with the Australian Dollar, investors have continued to bid the commodity bloc currency amidst a positive risk environment. The Bank of Canada meet this week and are widely expected to keep rates on hold though the outlook might once again take a downshift given recent Oil weakness as over-supply concerns once again dog energy prices.

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