Non-Commercials increased their net long positions in the Euro last week buying a further 8k contracts to take the total position 141k contracts. Euro upside positioning is climbing back towards recent highs as the market anticipates a faster pace of ECB monetary policy normalisation than currently projected.
At its recent meeting the ECB confirmed a shift away from the easing bias which has been in place over the last decade and said that due to broad based growth momentum across the eurozone, a shift in policy is required. While the shift in policy has so far been confined to tapering of the bank’s huge asset purchase program, traders will be keenly tracking data and ECB commentary for any sign that the bank is close to lifting rates again.
Non-Commercials increased their net long positions in Sterling last week buying a further 10k contracts to take the total position to 34k contracts. Investor sentiment has been increasingly positive in GBP over the las few weeks as the market reacts to positive developments within the Brexit negotiations landscape. The EU and UK recently agreed a 21-month transition period during which time the UK will remain in the single market after officially exiting the EU. This has assuaged a great deal of investor concern and has once again returned focus to the market’s expectation that the BOE will raise rates at the upcoming May meeting.
Non-Commercials reduced their net short positions in the Japanese Yen last week buying 18k contracts to take the total position to -4k contracts. The record short position in JPY which built up over last year has now been almost totally reversed, marking a massive shift in sentiment among JPY investors. The policy divergence between the BOJ and most of the other G10 central banks which was driving the JPY short trade last year, based on the BOJ’s program of yield curve control, has now mostly dried up as BOJ chief Kuroda has said that the bank will be considering removing ultra-loose monetary policy over the coming year.
Non-Commercials increased their net short positions in the Swiss Franc last week selling a further 1k contracts to take the total position to -9k contracts. Downside exposure in CHF has been broadly unchanged over the last few weeks as the market struggles to establish a strong directional view. Expectations for a shift in SNB policy have been curbed somewhat over recent weeks as SNB chief Jordan has warned that its possible for excessive strengthening in the CHF as protectionist US trade policies cause disruption and could spark a trade war.
Non-Commercials reduced their net long positions in the Australian Dollar last week selling 10k contracts to take the total position to 8k contracts. The latest sales in AUD came ahead of the RBA’s April meeting which saw the bank keeping rates on hold, as expected, for the 18th consecutive meeting, marking the longest stretch of unchanged monetary policy in the bank’s history.
With inflation remaining stubbornly below the RBA’s target range and wage growth still subdued, the market is struggling to gauge when the bank is likely to lift rates. Indeed, although a hike is still priced in for later in the year, a lack of encouraging commentary by the RBA is doing little to cement this view and many players are now questioning the likelihood of a move in 2018.
Non-Commercials reversed their net long positions in the Canadian Dollar last week selling 52k contracts to take the total position to -27k contracts. The huge shift in sentiment for CAD investors comes amidst rising trade tensions linked to the US’s protectionist trade policies which has weighed on equity prices and oil prices over recent weeks.