EUR longs gained ground, USD positions continued to push into negative ground - Rabobank

According to IMM net speculators’ positioning as at January 30, 2018, net USD positions continued to push into negative ground last week, though net shorts remain below the levels achieved at the end of November. 

Key Quotes

“The impact of higher Fed rates in the FX market has been diluted by talk of less accommodative policies from other G10 central banks. However, the recent sharp increase in US note and treasury yields could provide some USD support.”

“EUR longs gained even more ground last week and strong economic data continue to support the outlook. ECB President Draghi made some attempt to push back against EUR strength at the January policy meeting, though this was judged to be half-hearted.”

“Net GBP longs gained for a fifth consecutive week, allowing them to hold at their highest level since July 2014. Optimism that a Brexit transition period will be confirmed in the coming months and solid UK economic growth has helped to support the pound. However, looking ahead, EU/UK trade talks are likely to be tough and existing cracks in PM May’s cabinet have been exposed as ministers make clear differing views on Brexit outcomes.”

“Net JPY shorts fell back to levels last seen in December. Interest rate differentials are negative for the JPY given the BoJ commitment to its QQE programme. However, demand for safe havens, in light of the souring of risk appetite, is yen supportive.”

“CHF net shorts fell back last week. Although net positions have been in negative territory for twenty-six consecutive weeks, risk appetite has dropped back and this is CHF supportive.”

“CAD longs surged higher on optimism ahead of the Canadian November GDP release. That said, in the spot market the CAD weakened later in the week.   AUD positions edged lower. The current jittery tone in markets suggests further downside pressure may be seen.”