Summary

Latest CFTC positions data, published on Friday, reveals moderate defensive positioning by leveraged type account (speculative investors), with the usual Safe Haven suspects (Precious Metals, US Treasury Bonds, Yen and VIX) gain ground in term of long speculative positions. Having said that, two assets stand out, the Mexican Peso and the Canadian Dollar. Both were bought by leveraged investors, despite a clear risk off sentiment in other assets.

FX

Last week change in positioning saw a moderate USD buying against EUR and GBP (with the EUR net short positions moving further).

GBP net short position moved further, nearing 5-years high (meaning that the leveraged community is the shortest it has been).

USD net speculative position was little changed, while Yen net speculative position turned more positive, nearing 2008 highs.

Commodities Currencies (AUD, NZD, and CAD) moved slightly more positive in positioning term.

The odd man out this week is the MXN, which added 425,000 contracts compared to last week. This stands out as strange, as the general sentiment seems to be risk-off, which should push MXN positioning lower (i.e., usually in risk-off mode investors fleet from Emerging Markets into Safe Haven assets). The only plausible explanation could be the surprise rate hike by Banxico on Tuesday (0.5%, while the market expected unchanged rate). Given that the data represents the positioning change for the week ended on Tuesday End-of-Day, this could explain the move.

Commodities

Last week change in positioning saw a continuation of the move into Precious Metals (with net speculative long position at extreme levels).  Crude Oil saw some recovery in position term.

Gold/Silver continue to exhibit strong buying by leveraged type accounts, moving net long positions further up. Both are at all-time high in positioning term, which supports the logic that the market expects a very loose monetary policy by central banks going forward, on the back of Brexit uncertainty. Furthermore, looking at Bloomberg "Total Known Gold/Silver ETF Holdings" which tries to capture to total amount of physical quantity of Gold/Silver held by ETFs, reveals that investors (mostly household investors) continue to pile up, and adding long positions.

Rates

Last week change in positioning continues to point toward US Treasury Bond buying by the leveraged community. This, the same as in precious metals, indicates that the general belief by the speculative investors that monetary policy is likely to remain accommodative for a very long time.

Position in 2-year note gained slightly more than the 10-years note, which sits with the view that the short term rate is unlikely to move further. Both positions are nearing an extreme level, which is widely reflected by the yield levels of the US Treasury notes (10-years note yield hovering around all-time low)

Equities

 Positions in US equities declined slightly last week, while positions in VIX increased.

S&P500 positions declined slightly, yet the leveraged community is still net long equities

Nasdaq100 positions declined more than the S&P500, after a steep declined following the equity sell-off on the back of the Brexit vote.

VIX positioning continues to grind higher, recovering from 3-years low. It seems like protection is a valuable commodity nowadays, and despite equities swings, protection is relatively cheap (VIX trading at 1-year low).

FX Scoreboard

Our G10 Scoreboard shows USD as the biggest winner overall (trading the strongest against its G10 peers), followed by the NZD and the EUR.

The weakest among G10 currencies are the GBP, the CAD, and the SEK.

Few interesting pairs to look at (as they seem to diverge to some extent are the AUDNZD and the NOKSEK). These currencies tend to be highly correlated on average, however they seem to be diverging according to the FX Scoreboard.

Lastly, oil-correlated currencies (CAD and NOK) seem to be ranked quite distant apart. This raises question regarding how far they can diverge, as their correlation to oil on average is strong.