Non-Commercials reduced their net long positions in the Euro last week selling 52k contracts to take the total position to 36k contracts. This massive reduction in upside exposure comes in the wake of the ECB’s June meeting where the central bank delivered a blow to EUR bulls by saying that rates will stay at current levels at least until Summer 2019. While the bank highlighted that it will wind down its huge QE program by the end of the year, Draghi was quick to highlight that rates will remain accommodative and pointed to recent data weakness in the eurozone. Investors were expecting the news on QE but were caught off guard by the comments on rates and positions have been sharply cut subsequently.
Non-Commercials reversed their net long positions in Sterling last week selling 30k contracts to take the total position to -19k contracts. Sentiment has turned sour on GBP, as recent data weakness has seen investors dialling back their expectations of an August rate hike. While the bank sounded constructive last time around, poor growth figures have hampered expectations and traders will be keen to receive the final release of Q1 GDP this week. If there is any upward revision this could fuel a relief rally in GBP which has been on a downward trajectory over recent weeks.
Non-Commercials reversed their net long positions in the Japanese Yen last week selling 40k contracts to take the total position to -35k contracts. Despite growing uncertainty linked to trade war concerns, it seems that the market is not turning to the Yen for its safe haven qualities, instead preferring to play it to the short side in the wake of dovish developments within the BOJ. At its last meeting the bank removed the target timeframe for achieving its inflation goals which has been taken by the market as a sign of the bank having lost confidence in its ability to pull inflation up.
Non-Commercials reduced their net short positions in the Swiss Franc last week buying 5k contracts to take the total position to -32k contracts. While the market has been selling JPY it looks as if some of safe haven flows have been going into CHF, which has traditionally been used as a buffer during times of economic uncertainty and low risk appetite. While the SNB has confirmed its dovish stance recently, it seems that risk flows are driving price more for now.
Non-Commercials increased their net short positions in the Australian Dollar last week selling 28k contracts to take the total position to -43k contracts. Although the RBA highlighted that policymakers now agree the next move in rates will be up, there is still no greater clarity on when this might. With the bank reaffirming the risks that remain in the economy from low wage growth, weak household income and the housing sector, the market is not looking for a hike any time soon. Added to this is the uncertainty presented by the trade standoff between the US and China, Australia’s biggest trading partner, which is further clouding the outlook for the RBA.
Non-Commercials reduced their net short positions in the Canadian Dollar last week buying 1k contracts to take the total position to -14k contracts. While expectations for a further BOC rate hike in July had been growing, the trade tensions between the US and Canada are making it a much tougher call. This is reflected in market pricing for the event with the probability of a rate hike having fallen from 75% to around 55% currently.