ECB caught a market VERY short EUR - ANZ

FXStreet (Guatemala) - Analysts at ANZ noted, in respect to the CFTC speculative positioning data for the week ending 1st Dec, that leveraged funds went into last week’s ECB meeting carrying the largest net short EUR position since April.

Key Quotes:

"There was net selling of EUR for the sixth consecutive week, taking overall net short positions to USD19bn. The smaller than expected easing delivered at the 3 December ECB meeting resulted in a short-squeeze which sent EUR rallying sharply. We will find out how much short positions were unwound when the next set of data is released. But given the size of the position that had been built up, it will probably take a few weeks to undo.

Bearish bets against CHF by leveraged funds rose to a new record high of USD3.6bn. This is likely an indirect play on expectations of more aggressive ECB easing, which was expected to weaken the Swiss franc. Similar to the euro, we expect to see a large unwinding of CHF short positions at the next CFTC report.

For the first time since April, leveraged funds have turned net short on GBP.The USD0.6bn of net selling in the week took overall GBP positions from net long USD0.3bn in the previous week to net short USD0.3bn.

Commodity currencies bucked the trend of lower commodity prices. There was net buying of commodity currencies worth USD0.6bn, with AUD seeing net buying of USD0.8bn to reduce its overall net short position to USD0.9bn. This is despite iron ore prices falling almost 4% during the period. CAD saw net selling for the third consecutive week, increasing its overall net short position by USD0.2bn to USD2.0bn.

Leveraged funds reduced their net short exposure in EM currencies slightly. This was mainly through lowering their net short position in MXN from USD0.5bn to USD0.4bn. Short positions in BRL and RUB were increased slightly.