EUR longs edged lower, USD positions fell into negative territory - Rabobank

According to IMM Net Speculators’ Positioning data as at July 25, 2017, net USD positions fell into negative territory for the first time since June 2014 last week as messy domestic US politics, weak inflation data and the pull of low bond yields weighed on the USD, notes the analysis team at Rabobank. 

Key Quotes

“The acceleration in the pace of world growth and the improved fundamentals in the Eurozone have arguably encouraged the rotation out of the USD into higher yielding currencies in addition to the EUR.”

“GBP shorts increased again last week, though they remain well below their March highs. Against a backdrop of strengthening world growth, UK economic data have been generally sluggish. Evidence of a slowing UK economy raises doubts about the BoE’s ability to pull the trigger on rate rises and the impact of the hawkish sentiments expressed by three MPC members in the June policy meeting is fading.”

“EUR longs edged lower from last week’s lofty levels but remain elevated. Better Eurozone economic data and Macron’s success in the French parliamentary election has strengthened the tone of the EUR since the spring. Focus is firmly on the ECB and any hint that it is preparing to taper its QE programme next year.”

“JPY shorts dropped a little having the previous week reached their highest levels since January 2014. The BoJ has maintained very dovish rhetoric in contrast to several other central banks. However, demand for safe haven remains a primary influence for the JPY. Geopolitical uncertainty in particular related to the testing of nuclear missiles by N. Korea could offer support to the JPY going forward.”

“CHF shorts dropped last week but no firm direction is evident. The improvement in the Eurozone economy should over time reduce safe haven demand for the CHF and this was very evident in the spot EUR/CHF cross last week.”

“CAD longs have ploughed forward as the market debates whether the BoC could be prepared to hike rates again soon. AUD long positions also pushed further ahead having moved decisively back into positive territory in June as iron ore prices recovered.”