Non-Commercials increased their net long positions in the Euro last week buying a further 4k contracts to take the total position to 148k contracts. Upside EUR exposure continues to grow as positive Eurozone data bolsters expectations that the ECB will remove accommodative monetary policy at a quicker than expected rate. At its latest meeting the bank highlighted that it does not forecast a rise in eurozone inflation rates over 2018, though did note that the economy is improving and the ECB will monitor economic data.
Non-Commercials reduced their net long positions in Sterling last week selling 1k contracts to take the total position to 32k contracts. While slightly reduced at current levels, GBP sentiment remains positive with investors reacting favourable to strong domestic data and a supportive BOE environment. At its upcoming meeting, the BOE is widely expected to leave rates unchanged, highlighting its data dependant, wait-and-approach. However, traders are expecting a further hawkish shift from the BOE given the recent strength of recent inflation and labour market data. Current market expectation is for the BOE to raise rates in November though traders will be highly responsive to any cues that suggest the bank could raise rates over the coming months.
Non-Commercials reduced their net short positions in the Japanese Yen last week buying 8k contracts to take the total position to -114k contracts. Selling pressure has eased up in the Japanese Yen over recent weeks as the market has started to digest the potential that the BOJ is weighing up a shift in policy. Unexpected news of a tapering of the bank’s asset purchases has amplified these expectations which were originally provoked by comments from BOJ’s Kuroda at the end of last year regarding the dwindling effect of such low interest rates. On the data front, this week traders will be watching December Balance of payments data due on Wednesday which is expected to show a firm surplus, further increasing upside risk for JPY.
Non-Commercials reduced their net short positions in the Swiss Franc last week buying 2k contracts to take the total position to -20k contracts. Position in CHF has stalled over recent weeks as selling pressure has lost momentum. The SNB reaffirmed its commitment to maintaining its current easing approach, highlighting that it remains willing to intervene as necessary. However, with the bank raising its inflation forecast, traders are wary that the SNB too is weighing up a shift in policy as the tide of normalisation sweeps across the G10 banks.
Non-Commercials reduced their net long positions in the Australian Dollar last week selling 3.5k contracts to take the total position to 13k contracts. While there has been a strong recovery in AUD sentiment over recent weeks due to strong commodity prices and better domestic and Chinese data. However, the turn lower in iron ore prices last week is clearly weighing on AUD sentiment for now. Traders this week will be focusing on the RBA’s February meeting and while the bank is not expected to adjust rates, traders will be keen to see how the RBA has altered its outlook in response to firming inflation and the general improvement in the economy noted in the December meeting.
Non-Commercials increased their net long positions in the Canadian Dollar last week buying a further 11k contracts to take the total position to 33k contracts. CAD upside exposure has been rising steadily over the last month as the BOC’s first hike of 2018 has the market looking ahead to the next increase. BOC’s Wilkins will give her first speech since the January hike this week and traders will be keen to hear her assessment. The market is currently expecting a further 2 – 2.5 hikes this year though NAFTA negotiations pose a risk to this.