Net short USD lessened modestly, EUR longs edged slightly lower - Rabobank

According to IMM net speculators’ positioning as at February 20, 2018, net short USD positions lessened modestly for a third consecutive week.

Key Quotes

“In the spot market the tone has been mostly USD positive in recent sessions, although the USD’s better tone has run out of steam today.”

“EUR longs edged slightly lower as some economic data releases disappointed. Positions are now at their lowest since December. ECB President Draghi had made some attempt to push back against EUR strength at the January policy meeting, though this was judged to be half-hearted. The next ECB policy meeting is scheduled for March 08.”

“Net GBP longs almost halved for a second consecutive week and retreated to their lowest level since November. Although BoE rate hike speculation has increased, the market is being buffeted by news regarding Brexit and has been re-evaluating the assumption made at the end of last year that the agreement between the EU/UK on Brexit legacy issues will set the tone for a smooth set of trade talks. Political uncertainty related to the Brexit transition period could keep a lid on the pound going forward as could confusion caused by the deep divide within PM May’s government.”

“Net JPY shorts dropped back to their lowest levels since October. Interest rate differentials should be negative for the JPY given the BoJ’s commitment to its QQE programme. That said, the market is doubting how long the Bank will maintain this position. Demand for safe haven remains a primary source of support for the JPY.”

“CHF net shorts slipped for a fourth consecutive time. Net positions have been in negative territory for twenty-nine consecutive weeks. Falls in risk appetite tend to be CHF supportive but fear of SNB intervention should prevent strong surges in demand for the CHF going forward.”

“CAD longs dropped back sharply. Oil prices, Nafta talks and the BoC policy outlook remain in view.   AUD positions recovered some ground. Sentiment in the spot market has been choppy but AUD/USD is holding above its recent lows.”