USD shorts rose, EUR longs surge - ANZ

According to the CFTC positioning data for the week ending 26 September 2017, leveraged funds were net USD sellers for the third consecutive week despite a hawkish FOMC and a recovery in the DXY Index.

Key Quotes

“Overall net short USD positions rose by USD3.1bn to USD11.5bn, the highest since May. Market pricing for a December Fed rate hike has now risen to 70%. Further progress on the Trump administration’s tax reform plan will have an important bearing on positioning in the coming weeks.”

“Dollar selling was broad based except against the yen, in a week where Japanese Prime Minister Abe called for a snap election. Net JPY shorts were re-built by USD2.1bn to USD5.9bn, the largest weekly net yen selling in 11 weeks.”

“EUR saw the largest net buying in the week. Funds increased their net long EUR position by USD2.7bn to USD2.9bn as Merkel won a fourth term as German Chancellor. Meanwhile, net GBP shorts were trimmed by USD1.4bn to turn overall net long for the first time since prior to the Brexit vote. However, a downward revision in UK’s Q2 GDP to its weakest since 2013 could see positioning reverse in the coming week. Net long CHF positions were also raised marginally in the week.”

“Funds turned buyers of commodity currencies after three straight weeks of net selling. This was primarily led by CAD where funds added USD0.8bn to take their net long CAD position to USD5.1bn, the highest overall net longs since January 2013. Net long AUD position was also raised by USD0.2bn whereas funds reversed their seven week NZD selling streak to turn net buyers to the tune of USD0.1bn during the week.”

“Funds flipped their positioning from the previous week to turn net buyers of EM currencies. All three currencies (MXN, BRL and RUB) saw combined net buying of USD0.3bn in the week.”

“Net long gold contracts were trimmed for the second consecutive week. Net longs in 10-year USTs fell as yields kept inching up, while net long crude oil contracts rose again, in line with the pick-up in Brent oil prices into the cut-off date.”