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Positioning Points To A Near-Term USD Downside‏

ByDanske Markets
Published 09/16/2013, 07:14 AM
Updated 05/14/2017, 06:45 AM

The latest IMM data covers the week from 4 September to 10 September.

The week to 10 September saw another cutback in EUR longs as investors turned to USD, GBP, and a range of the commodity currencies. This continuous addition to USD longs despite the weak payrolls report suggests that speculators are overall positioned for Fed tapering to be announced later this week. Focus is likely to now turn to the pace of tapering and whether the current (in our view somewhat aggressive) pricing of eventual Fed hikes is warranted. This could induce a temporary period of USD weakness.

Unsurprisingly, investor sentiment towards sterling is gradually turning less sour as economic data continue to improve. Speculators do however remain net short GBP and albeit less extreme than earlier in the year there is still room for short covering if the positive data momentum continues. We will publish updated FX forecasts later today and now see GBP strength – and subsequent weakness further out – materialising earlier than we previously anticipated. That is, eventually data will start to confirm that slack in the UK economy will prevent the Bank of England from hiking rates for years to come.

Unwinding of shorts in notably AUD confirms that sentiment towards emerging markets, and those dependent on trade with these, has made a turn for the better. However, the percentage of AUD shorts remain at elevated levels, suggesting that if a Chinese bottom is confirmed the AUD could be in for a temporary revival.

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