Non-Commercials increased their net long positions in the Euro last week buying 3.5k contracts to take the total position to 93k contracts. EUR long positions remain intact as investors continue to see the ECB increasing the speed of the tapering over the coming months. Recent data has reaffirmed the positive economic picture in the eurozone with upward revisions to 3Q GDP growth from 2.5% to 2.6% YoY.
The key focus, this week will be on the US FOMC rate decision at which the Fed is widely expected to raise rates. With a 0.25% increase already prices in, the key focus will be on the guidance the bank offers with regard to the rate path over 2018. Any uptick in the Fed’s projected rate path will see a stronger USD bid, while an unchanged rate path or downward revision should see some USD squaring.
Non-Commercials increased their net long positions in Sterling last week buying 2k contracts to take the total position to 6.5k contracts. Investors have continued to build their GBP long exposure as the market reacts to the latest Brexit updates. News of a compromise over the Irish border issue has allowed the EU & UK to push ahead with a “divorce bill” deal. This is crucial as it means the talks can progress to the terms of trade deals, which is the priority for the UK. Focus this week will be on November CPI data due on Tuesday, which is expected to remain steady at 2.7% on the core reading. Another print in this region will keep Hawkish BOE expectations in place, keeping GBP supported.
Non-Commercials increased their net short positions in the Japanese Yen last week selling 3.5K contracts to take the total position to -114k contracts. Investors continue to build their short exposure as the policy divergence between the BOJ and most of the other G10 central banks keeps JGB yields low. Geopolitical tensions have sporadically seen a safe haven bid entering the Japanese Yen as investors look to store capital, though the dominant theme is the BOJ’s reaffirmed commitment to maintaining easing.
Non-Commercials reduced their net short positions in the Swiss Franc last week selling 0.1k contracts to take the total position to -30k contracts. Short positions remain at their highest levels since 2016 as the SNB, like the BOJ, has reaffirmed its commitment to maintaining an easing bias and remaining active in the market. As such, CHF downside remains the preferred view for investors. At their policy meeting this week the bank is expected to keep rates unchanged alongside reiterating its message that the Franc remains overvalued and as such, the bank will stay active in the market.
Non-Commercials increased their net long positions in the Australian Dollar last week buying a further 1.5k contracts. Hawkish RBA expectations have receded from their high point in the summer as the RBA struck a more cautious tone in its meetings. However, at its latest meeting, the bank struck a more positive tone saying that stronger conditions in the labour market should see some lift in wage growth over time.
Non-Commercials reduced their net long positions in the Canadian Dollar last week selling 3k contracts to take the total position to 43k contracts. Upside positions have seen steady unwinding since summer as BOC rate hike expectations have faded. At its latest meeting the BOC kept rates unchanged but highlighted positive momentum in the jobs market. The latest jobs data showed that Canadian unemployment fell to its lowest level since 2008 over November. However, uncertainty linked to NAFTA negotiations as well as risks from the domestic housing market fuelled the BOC’s decision to stay on hold. This week traders will be watching BOC’s Poloz who speaks on Thursday.