Short USD positions lessened modestly, GBP longs almost halved - Rabobank

According to the IMM net speculators’ positioning as at February 13, 2018, net short USD positions lessened modestly for a second consecutive week and in the spot market the tone has been more obviously USD bearish as risk appetite has returned to risky assets, notes the research team at Rabobank.

Key Quotes

“EUR longs fell last week to their lowest levels since early January. 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 and retreated to their lowest level since last December. Although BoE rate hike speculation has increased, the market is 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 crept moderately higher as sentiment in risky assets improved. Interest rate differentials should be negative for the JPY given the BoJ’s commitment to its QQE programme, though the market is doubting how long the Bank will maintain this position.”

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

“CAD longs dropped back after the previous week’s jump. Oil prices and Nafta talks remain in view.   AUD positions also fell. Overall sentiment appears to have stabilised in the spot market.”