Non-Commercials reduced their net long positions in the Euro last week selling 21k contracts to take the total position to 131k contracts. This sharp reduction in EUR upside positioning came ahead of the ECB’s April meeting and reflected the cautious view of the market in response to recent data softening in the eurozone.
As expected, the ECB kept rate unchanged though the accompanying statement was decidedly less hawkish than last time around. with the ECB chief acknowledging the slowdown in economic momentum in the eurozone though noted that the ECB remains confident about inflation moving back to target over the forecast horizon. However, the key bearish catalyst was the ECB chief saying that the bank is prepared to extend bond buying beyond September if necessary and in any case, interest rates will stay low until well after asset purchases cease.
Non-Commercials reduced their net long positions in Sterling last week selling 10k contracts to take the total position to 37k contracts. Following an extended period of consistent GBP buying, selling pressure kicked as BOE chief Carney took the market by surprise as he poured cold water on hopes for a May rate hike.
Speaking during an interview, the BOE chief said that due to recent data weakness there was a case for keeping rates unchanged at the May meeting, at which prior to these comments the bank had been expected to raise rates. However, Carney did note that even if the bank doesn’t raise rates this time around, it doesn’t mean that the bank won’t raise rates later in the year.
Non-Commercials reduced their net long positions in the Japanese Yen last week selling 2k contracts to take the total position to 0.5k contracts. JPY positioning has lost impetus over recent weeks after recently switching net long for the first time since 2016. Positive developments in the global geopolitical environment over recent weeks have seen a diminished safe haven bid in the Yen as the trade war tensions between the US and China have receded somewhat and North Korea and South Korea appear to be working together to achieve peace.
Non-Commercials reduced their net short positions in the Swiss Franc last week buying 0.3k contracts to take the total position to -10k contracts. CHF has been out of the limelight over recent months as focus has shifted to the US and Europe. The SNB recently reaffirmed its commitment to remaining in the market as necessary to protect against any excessive CHF strengthening which might occur in response to any further escalation on the trade war between the US and China.
Non-Commercials reduced their net short positions in the Australian Dollar last week buying 7k contracts to take the total position to -3k contracts. The latest inflation data for Australia unexpectedly showed CPI returning to the bottom of the RBA’s 2% – 3% target band which, alongside improvements in the trade war between US and China (Australia’s biggest trading partner) has seen an improvement in sentiment towards the antipodean currency. However, with clear financial risks remaining in the domestic economy, it is still likely to be a while before the bank raises rates though, in an encouraging development for bulls, at the last RBA meeting, policy makers agreed for the first time that the next move in rates will be up, though they are still unsure about timing.
Non-Commercials reduced their net short positions in the Canadian Dollar last week buying 5k contracts to take the total position to -25k contracts. This latest reduction in short positioning came ahead of the BOC’s April meeting where the bank struck a positive, hawkish note saying that the economy is “finally positive” after a long adjustment to the sharp oil price declines of recent years. Governor Poloz said that further gradual increases in the interest rates can be expected accordingly though did note that some weakness remains in some areas of the country.