The latest IMM data covers the week from 9 June to 16 June 2015
IMM positioning data released Friday show that speculators continue to unwind their bearish EUR positions . While short EUR exposure has been reduced in nine out of the last eleven weeks, the last two weeks' change in positioning marks the largest fortnight unwinding of short EUR positions since September 2013 (when the Fed surprised markets by not introducing a tapering programme). The shift in positioning has been sparked by a series of factors leading to higher EUR rates but noteworthy the change also comes amid a souring of news with respect to the Greek negotiations. In our view, this suggests that FX markets price in a high probability of an agreement being reached at today's Euro Summit on Greece. This is also consistent with our short-term regression models indicating that the Greek risk premium currently embedded in EUR/USD is significantly smaller than in 2011/2012. While it remains our base case that a deal is reached (see Grexit - what if, 17 June), the fact that speculative EUR positioning has moved to the least bearish level in a year leaves a considerable downside potential should negotiations break down.
Investors also significantly reduced their bearish JPY positions in the week to 16 June, highlighting expectations of no further easing at the 19 June Bank of Japan (BoJ) monetary policy meeting. As we now know, BoJ indeed left monetary policy unchanged and it remains our call that Governor Kuroda will leave the pace of the asset purchase programme unchanged until the inflation target is reached.
The very significant moves in EUR and JPY positioning reduced aggregate bullish USD positions by the largest single week amount since September 2013 (see page 2) This has sent speculative USD positioning to the 93rd percentile - the least bullish level since August (see page 3) - and we suspect that positioning has been reduced further post the more dovish-than-expected Fed meeting on 17 June (see FOMC meeting - Inner circle of FOMC tilts towards one hike this year, 18 June). This leaves a greater upside potential for the DXY index in the coming months as we - contrary to market pricing - still expect the Fed to hike in September.
Noteworthy, speculators remain short all currencies in the report (vis-a-vis the USD) except for the CHF and the RUB .
In commodities, speculators increased their bullish oil positions (remains 'neutral').
To Read the Entire Report Please Click on the pdf File Below