Forex Institutional Positioning Update

EUR Bulls Disappointed By Lacklustre December ECB Meeting

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EURUSD

eurusd

Non-Commercials reduced their net short positions in the Euro last week buying 5k contracts to take the total position to -56k contracts. This latest position adjustment came just ahead of the December ECB meeting, reflecting the market’s expectation that the bank would announce an end to QE. As anticipated, Draghi announced that QE would be wound down from the end of the month.

However, the tone of the meeting was decidedly more dovish with Draghi acknowledging that risks to the Eurozone were starting to tilt to the downside. If Eurozone data continues to weaken, the market is likely to start moving its rate pricing out further into the back end of 2019 weighing on EUR.

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GBPUSD

gbpusd

Non-Commercials increased their net short positions in Sterling last week selling a further 3k contracts to take the total position to -42k contracts. GBP remains vulnerable to highly volatile Brexit headlines. News last week that PM May pulled the parliamentary vote only a day ahead of schedule sent GBP into a tailspin as investors saw the risks of a “no deal” Brexit soaring. This was followed by a “vote of no confidence” in May, though the embattled PM went on to win the secret ballot to maintain her position.

USDJPY

usdjpy

Non-Commercials reduced their net short positions in the Japanese Yen last week buying 12k contracts to take the total position to -97k contracts. Positivity around trade talks between the US and China aimed at delivering a full trade deal by March 2019, has seen a reduction in safe-haven inflow for JPY. Furthermore, with the BOJ continuing to reaffirm its commitment to easing, defending the necessary use of negative rates, there is little to get excited about in the bigger picture.

USDCHF

usdchf

Non-Commercials reduced their net short positions in the Swiss Franc last week buying 1.5k contracts to take the total position to -18k contracts. Net purchases in CHF last week reflect the tone of relief among investors regarding ongoing US/China trade talks. However, risks from Brexit still remain and have grown larger which is likely to keep CHF underpinned by safe-haven demand. The SNB continues to reaffirm its commitment to maintaining a presence in the market as necessary to protect CHF from any excessive strengthening.

AUDUSD

audusd

Non-Commercials reduced their net short positions in the Australian Dollar last week buying 5k contracts to take the total position to -45k contracts. Though the RBA continues to highlight obstacles and challenges within the economy, AUD was much better bid last week linked mainly to the positive news around a potential US/China trade deal which would be a major boost for Australian economic activity.

The release of the December RBA meeting minutes this week is unlikely to be market moving given the relatively unchanged statement issued by the RBA at the meeting though there are downside risks if there is any mention of potential easing in the near term.

USDCAD

usdcad

Non-Commercials reduced their net short positions in the Canadian Dollar last week buying 1.3k contracts to take the total position to -12k contracts. At its latest meeting, the BOC refrained from raising rates a fourth time this year. The BOC cited the dramatic oil weakness seen recently in its decision to keep rates on hold. However, with OPEC announcing that itself and a group of allied producers led by Russia are to start cutting production in January 2019, there is scope for oil prices to rise again which would likely see the BOC move back to tightening in Q1 next year.

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