EUR longs dropped, USD longs continued to edge up – Rabobank

According to the IMM net speculators’ positioning as at July 10th, 2018, after having surged to their highest level since June 2017 in the middle of last month, USD speculators’ positions have continued to edge up. 

Key Quotes

“Support for the USD reflects heightened capital outflows from emerging markets and an indication from the FOMC that rates could be increased by a total of 4 times this year.”

“EUR longs dropped again in the latest set of data suggesting that the previous week’s move higher was an abnormality in the downward trend. Net longs are now at their smallest since May 2017. Last month’s message from the ECB that rates may not be raised until at least summer 2019 has weighed on the EUR.”

“Having plunged into negative territory in the middle of June, GBP shorts have continued to grow. Even though better UK economic data have bolstered the market’s confidence of an August BoE rate rise, UK political uncertainty remains a significant risk factor for the pound.”

“Net JPY short positions jumped in mid-June on the heels of the US/N. Korean summit and in the past couple of weeks they have extended further despite the fear of trade wars. This suggests that geopolitical risk rather than economic risk has been a bigger driver of flows in the safe-haven JPY.”

“CHF net shorts edged a little lower last week though they remain at relatively high levels. The SNB maintains committed to ultra-accommodative policy and this is likely diverting safe haven flow into the USD.”

“CAD shorts continue to march higher. In the spot market the CAD has performed poorly in response to softer commodity prices. AUD shorts remain at elevated levels. Increasing US/China trade tensions have weighed on confidence. RBA minutes are awaited this week.”