Dollar-bloc currencies diverging due to policy divergence – ING

According to the CFTC FX positioning data for the week 6-12 November, net positioning on the Canadian and Australian dollar dropped and is fair to assume this is mostly related to idiosyncratic stories, given that global risk sentiment remained supported and safe havens were also shorted in the week, suggests Francesco Pesole, FX strategist at ING.

Key Quotes

“In Canada, the correction in the (still elevated) net long positions was triggered by some disappointing labour data. Some cracks in the previously very tight jobs market had endorsed the notion that the Bank of Canada may be close to cutting policy rates and likely triggered a lagged negative effect of the 30 October Bank of Canada meeting - which had a limited impact on CAD positioning despite the Bank's dovish shift.”

“The correction in the Australian dollar (net positioning dropped by 9% of open interest) seems to have a less obvious catalyst. However, it is still likely related to the monetary policy outlook.”

“The long-awaited correction in the oversold New Zealand dollar finally appeared in the CFTC data, as short speculative positions were trimmed in the reference week (+6% on net positioning).”