Non-Commercials reduced their net long positions in the Euro last week selling 12k contracts to take the total position to 24k contracts. The record EUR long position that built up over Q1 in anticipation of ECB monetary policy tightening has now been slashed by around 80% as the market adjusts to the ECB’s shifting stance. While the central bank has confirmed that it will be winding down its QE program by year end, it also noted that rates will remain at current low levels until at least summer 2019. Traders will be closely watching the final Eurozone inflation print for June due on Wednesday.
Non-Commercials increased their net short positions in Sterling last week selling a further 11k contracts to take the total position to -40k contracts. GBP has now been net sold for the last five weeks as growing political uncertainty has overshadowed expectations of a BOE August rate hike. Theresa May’s Brexit negotiations are in peril, as her own cabinet is revolting against her, leading to speculation of a leadership challenge which could see the current PM ousted. Traders have a lot of UK data to take on board this week, with CPI and labour market data due, both of which have the potential to derail an August rate hike with any downside surprises.
Non-Commercials increased their net short positions in the Japanese Yen last week selling a further 1k contracts to take the total position to -40k contracts. After briefly turning positive earlier in the year, JPY positioning has once again shifted to the downside as the market reacts to the BOJ having removed the target timeframe from its inflation objective, move which has been interpreted as a indicative of the bank having lost confidence in its ability to boost inflation. Interestingly, despite elevated global uncertainty, JPY is not seeing the typical safe haven inflows associated with weaker equity and commodity prices which seems best explained by the negative impact a global trade war is likely to have on the Japanese economic outlook.
Non-Commercials reduced their net short positions in the Swiss Franc last week buying 400 contracts to take the total position to -40k contracts. CHF positioning has seen limited adjustment over recent weeks as safe haven inflows have stemmed the sell off. The SNB continues to reaffirm its commitment to maintain a presence in the market to ward off any further CHF strengthening which, against a backdrop of more hawkish central banks in the G10, should keep CHF pressured in the medium term.
Non-Commercials increased their net short positions in the Australian Dollar last week selling a further 2k contracts to take the total position to -41k contracts. AUD sentiment has shifted sharply to the downside as the trade war between the US and China, Australia’s largest trading partner, continues to threaten the Australian economy. The decline in commodities prices is pushing Australia’s terms of trade lower. Traders this week will be keen to hear the minutes from the RBA’s latest monetary policy meeting to learn how the bank assesses this situation and how it regards its impact on the domestic economy following the more dovish tone to the statement from the July meeting.
Non-Commercials increased their net short positions in the Canadian Dollar last week selling a further 3k contracts to take the total position to -53k contracts. CAD short positioning has been growing strongly over recent weeks as the trade standoff between the US and Canada continues to threaten the outlook for the Canadian economy. Interestingly, the continued decline in CAD comes amidst further BOC tightening last week, which was widely signalled by the bank, showing that the rates story in Canada has taken a backseat to the US/Canada trade situation despite the BOC signalling that further rate hikes are warranted.