Non-Commercials reduced their net long positions in the Euro last week selling 6k contracts to take the total position to 89k contracts. Following the breakdown of coalition talks in Germany a fortnight ago, EUR has remained well supported due to strong German economic data. Focus will remain on Germany this week as the market awaits the release of German factory orders on Wednesday, followed by a speech from ECB’s Draghi on Thursday. The ECB president is scheduled to speak at the BIS in Frankfurt but is not expected to comment on monetary policy.
Non-Commercials reversed their next short positions in Sterling last week buying 5k contracts to take the total position to 5k contracts. Positioning continues to fluctuate sharply in GBP as investors grapple with the opposing forces of Brexit uncertainty and BOE hawkishness. While progress has been made on the Brexit front, with the UK agreeing to a “divorce bill” settlement, the Irish border issue has grown in prominence and threatens to be a significant hurdle. On the data front this week, traders will be watching November services PMI due on Tuesday.
Non-Commercials reduced their net short positions in the Japanese Yen last week buying 12k contracts to take the total position to -110k contracts. The large short position in JPY, which recently moved to its highest level since 2014, has been reduced over the last two weeks through a mixture of profit taking and safe haven inflow due to increased geopolitical tension between the US and North Korea. On the data front this week traders will be watching Q3 GDP due on Friday along with wage data also due on Friday.
Non-Commercials increased their net short positions in the Swiss Franc last week selling .5k contracts to take the total position to -30k contracts. The Swiss Franc has been under heavy selling pressure over recent months as the policy divergence between the SNB and the majority of the other G10 central banks has become a go-to trade. At their upcoming December meeting the SNB is not expected to adjust their policy stance but will likely reiterate their commitment to easing in an effort to stop the Franc from experiencing any further strengthening.
Non-Commercials reduced their net long positions in the Australian Dollar last week selling 1k contracts to take the total position to 39k contracts. The large AUD long position which built up over the first half of the year on expectations of an imminent RBA rate hike has now been reduced by half as it has become clear that such expectations are premature. The RBA has struck a far more cautious tone over recent meetings and low household income and subdued wage growth continue to pose a threat to the trajectory of the economy. At their upcoming December meeting this week the RBA is widely expected keep rates on hold and reiterate their cautious outlook on the economy.
Non-Commercials increased their net long positions in the Canadian Dollar last week buying a further 5k contracts to take the total position to 46k contracts. While long exposure has been reduced over recent months as traders have dialled back BOC rate hike expectations, the market remains optimistic regarding the likelihood of an early 2018 raise, reflected in the current level of positioning. At its upcoming meeting this week, the BOC is not expected to adjust policy and is likely to reiterate its message of caution, highlighting risks from US trade policy as well as household debt levels which have become an issue of concern.