USD longs made slight recovery, EUR longs recovered - Rabobank

Analysts at Rabobank note that USD long positions made a slight recovery last week, although they continue to languish close to their weakest levels since February 2014 according o he IMM net speculators’ positioning as at July 4, 2017.

Key Quotes

“The generally soft tone reflects a lack of conviction in the Fed’s hawkish forward guidance and concern about the subdued level of US inflation data. Although the headline June non-farm payrolls data helped to reinvigorate market sentiment, the weakness of wage inflation leaves doubts over the Fed’s ability to carry out its tightening plans.”

“GBP shorts fell last week. That said, GBP weakened on the spot market towards the end of the week on the back of disappointing UK economic data. Evidence of a slowing UK economy raises doubts about the BoE’s ability to pull the trigger on rate rises, despite the recent appearance of hawkish testimony from some policy setters.

“EUR longs have recovered further ground last week to stand just below their recent high. Better Eurozone economic data and Macron’s success in the French parliamentary election has strengthened the tone of the EUR since the spring.”

“JPY shorts increased further latest week to their highest level since January. The BoJ has maintained very dovish rhetoric in contrast to other central banks and this has ignited carry trades. However, changing demand for safe haven remains a primary influence for the JPY. Geopolitical uncertainty in the Gulf region, political uncertainty in the US or further testing of nuclear missiles by N. Korea could offer support to the JPY going forward.”

“CHF shorts dropped again last week to their lowest level this year. The improvement in the Eurozone economy should over time reduce safe haven demand for the CHF.”

“CAD shorts fell further last week as the market debates whether the BoC could be prepared to hike rates as soon as this month after the rhetoric from two BoC officials appeared to be less dovish. The outlook for price of oil remains a key influence. AUD long positions pushed further ahead having moved decisively into positive territory last month as iron ore prices pushed higher.”