Non-Commercials increased their net long positions in the Euro last week buying a further 13k contracts to take the total position to 146k contracts. Investors have been steadily adding to their long exposure in the Euro as the market anticipates that the ECB will remove accommodative monetary policy at a faster pace than is currently projected. At its latest meeting the ECB, the ECB kept policy unchanged as expected but said that due to “broad-based growth momentum in the eurozone economy” it had removed its easing bias and has increased its forecasts for GDP growth. The meeting adds further weight to the market’s bullish EUR view and further positive data is likely to provide fuel for continued demand for the single currency.
Non-Commercials increased their net long positions in Sterling last week buying a further 3k contracts to take the total position to 8k contracts. Positioning adjustments in Sterling continue to reflect uncertainty as the market struggles to build a strong directional view. GBP Longs Rise Ahead of BOE meeting this week, the bank is not expected to move on rates as the meeting comes with no post-decision press conference and no inflation report. However, bulls will be hoping for further hawkish language from the bank and a signal that a rate rise is forthcoming in the near term which should fuel further GBP buying.
Non-Commercials reduced their net short positions in the Japanese Yen last week buying 7k contracts to take the total position to-79k contracts. Investors are continuing to unwind the large JPY short position which built up over last year as the market anticipates a shift in BOJ policy over the remainder of the year. In recent comments, BOJ’s Kuroda said that the bank will consider removing ultra-loose monetary policy into the end of fiscal year 2018 which is the first time any sort of timeline has been mentioned.
Non-Commercials increased their net short positions in the Swiss Franc buying 2k contracts to take the total position to -6k contracts. The CHF short position that built up into the end of 2017 continues to be unwound as the market anticipates that the SNB is on the verge of a policy shift given the recent upward revision to the bank’s inflation forecast. At the latest SNB meeting, chairman Jordan warned that the bank fears that US protectionism could trigger a trade war which could result in excessive strengthening of the Franc due to safe haven inflows.
Non-Commercials reversed their net long positions in the Australian Dollar last week selling 4k contracts to take the total position to -1k contracts. With positioning now flipping net short again, it is clear that the market is struggling to take a directional view on AUD. Expectations for an RBA rate rise in the coming months have now fallen following the recent weaker-than-expected GDP print. The RBA has recently warned that investors are too complacent about the risks of higher global rates especially concerning global equity prices though did not specifically refer to the domestic rates situation.
Non-Commercials reduced their net long positions in the Canadian Dollar last week selling 0.1k contracts to take the total position to 19k contracts. CAD long exposure has been consistently reduced over the last month as uncertainty around the NAFTA negotiations and increased US protectionism has fuelled a dialling down of BOC rate-hike expectations. The market is still pricing two further rate hikes for 2018 with recent BOC commentary encouraging this view. However, if the negative effects of US protectionism emerge this pricing could change.