Non-Commercials reduced their net long positions in the Euro last week selling 60 contracts to take the total position to 120.5k contracts. Despite being only slight in size, this latest positioning adjustment marks the third consecutive week where EUR longs continue to decrease, as investors continue to dial back their ECB tightening expectations in line with recent commentary and data.
At its latest meeting, the ECB struck a more cautious tone with ECB chief Draghi acknowledging the downturn in data over Q1 and reaffirming the bank’s commitment to maintaining accommodative monetary policy. While Draghi has previously said that the bank has now removed its easing bias, this time around, the ECB chief said that the bank remains willing to extend bond purchases beyond September if necessary, with rates due to stay low well beyond the completion of asset purchases.
Non-Commercials reduced their net long positions in Sterling last week selling 17k contracts to take the total position to 9k contracts. This latest spate of selling in Sterling came ahead of the BOE’s May meeting which had been expected to yield a further rate rise by the BOE. However, speaking during an interview ahead of the meeting, Carney squashed these expectations saying that recent data had dented the chances of a rate hike, making it more likely that the bank would raise later in the year, fuelling a subsequent sell-off in GBP.
At the meeting, the bank did indeed keep rates unchanged, acknowledging the downturn in data, and GBP was thrust lower as the bank also revised down its growth forecasts for this year and next. However, the bank did reiterate Carney’s message saying that it still intends to raise rates later this year.
Non-Commercials increased their net short positions in the Japanese Yen last week selling a further 4k contracts to take the total position to -5k contracts. JPY has now been net sold for four consecutive weeks as the market has responded favourably to a positive shift in global risk on the back of a moderation in rhetoric by the US and China over trade parameters and also the historic meeting between North and South Korean leaders last month. JPY positioning took a further shift as the bank removed its inflation target at is last meeting which has been taken by the market as a sign of a lack of confidence in the BOJ’s ability to bring inflation up, curbing any expectations of a rate rise in the short term.
Non-Commercials increased their net short positions in the Swiss Franc last week selling a further 13k contracts to take the total position to -33k contracts. CHF downside exposure has been building over recent weeks as the positive shift in global risk sentiment has seen diminished safe haven support for the Franc. At its latest meeting, the SNB told the market that it had plans to continue with its expansionary monetary policy and warned that prematurely tightening would risk damaging years of hard work done by the bank.
Non-Commercials increased their net short positions in the Australian Dollar last week selling 11k contracts to take the total position to -17k contracts. AUD short exposure is once again growing ahead of the RBA’s May meeting, due this week. At its latest meeting the bank highlighted its continuing concerns regarding slow wage growth and weak household income though policymakers did agree that the next move in rates would be up. Traders will be keen to hear that RBA’s latest assessment but the expectation is that the statement will likely not be much changed from the last meeting.
Non-Commercials reduced their net short positions in the Canadian Dollar last week buying 4k contracts to take the total position to -24k contracts. CAD positioning has shifted recently as institutional players react to higher Oil prices which have been supporting CAD and boosting its outlook. The latest data showed the Unemployment rate remaining unchanged at 5.8% in April while the net change in employment disappointed, printing -1.1k contracts against expectations of 17.4k contracts.