The latest IMM data covers the week from 15 to 21 January 2014.
The CHF and JPY shorts were seemingly cut already ahead of the meagre Chinese PMI figure which - coupled with a series of local events across the region - late last week sent sentiment on emerging markets tumbling. Similarly, MXN was ousted and notably saw speculators go from net long to net short in the week to 21 January - more AUD shorts were also put on. This suggests that if EM worries continue into this week there should be potential for USD gains - not least if we are right in seeing the Fed on autopilot in terms of both QE tapering and forward guidance.
It is also noteworthy that investors shredded the euro in a week that was dominated by concerns over the surge in EONIA fixings and non-commercial positioning on EUR is now largely square. This suggests that investors may have been factoring in the chance of an ECB move should money market jitters continue. We still expect downside inflation surprises to be the key driver of EUR downside in H1 but the potential for a move from position unwinding is now smaller than just a few weeks back.
To Read the Entire Report Please Click on the pdf File Below