The following data references the week ending Tuesday 5th July 2016.
EURUSD
Non-Commercials increased their Net short positions in the Euro last week selling further 13k contracts to take the total position to SHORT 75.3k contracts. Non-Commercials have been gradually increasing shorts in recent weeks as the effect of Brexit ripples through the markets. Whilst the ECB maintain their “wait and see” mode, for now, expectations for further easing continue to cap upside. Traders turn their attention this week to the final EuroZone inflation print for June, which is expected to remain unchanged at 0.1% on the headline and 0.9% on core.
GBPUSD
Non – Commercials increased their net short positions in Sterling last week selling a further 6k contracts to take the total position to SHORT 49k contracts. Following the extreme volatility in the wake of Brexit and subsequent downside moves in Sterling, there has been a short-term loss of momentum as markets await catalysts for the fresh downside. Attention this week turns to the Bank of England who meet on Thursday for their July rates decision. Market consensus is calling for a 25bps reduction with some analysts warning of the potential for a bigger cut. Alongside any action taken this week traders will also be keen to gauge the likelihood of further measures being enacted over the coming months. Failure on behalf of the BOE to signal clear intent leave GBP vulnerable to profit taking squeeze.
USDJPY
Non – Commercials increased their net long positions in the Japanese Yen last week buying a further 4k contracts to take the total position to LONG 64k contracts. Brexit related volatility and investor uncertainty have seen a renewed wave of demand for JPY in recent weeks as investors turn to the traditional safe-haven currency. An electoral victory for Japanese PM Abe is likely bearish for JPY as Abe stresses the need to push through economic policies aimed at defeating deflation in the country. This result gives Abe a green light to continues with fiscal stimulus and attention now turns to the BOJ July meeting at the end of the month
USDCHF
Non – Commercials reduced their net long positions in the Swiss Franc last week selling 2k contracts to take the total position to 9k contracts. CHF has been weighed upon a recovery in risk assets as growing expectations for further global easing have supported markets. The SNB confirmed that they had been active in the market to counter CHF strength in the wake of Brexit and intend to continue to ensure price stability with SNB Chair Jordan commenting over the weekend that the SNB must be ready to act in a flexible way to any risks arising from Brexit. Markets are now pricing a higher than 80% chance of a rate cut by September.
AUDUSD
Non-Commercials reduced their net short positions in the Australian Dollar last week and have now flipped net long buying 7k contracts to take the total position to LONG 5k contracts. AUDUSD continues to trade in a mixed manner with the RBA failing to provide a catalyst for renewed directional bias after they kept rates on hold at their recent meeting. The meeting did, however, provide a signal that further easing may be coming in the near future though for now AUD is supported by a recovery in risk sentiment. Domestic Unemployment data is the key focus this week expected to tick up to 5.8% from 5.7% previous
USDCAD
Non – Commercials increased their net long positions in the Canadian Dollar last week buying 4k contracts to take the total position to 12k contracts. The Canadian Dollar has found support from renewed upside in Oil prices as markets shake off their post-Brexit risk averse tone to trade higher on easing hopes. The Bank of Canada meet this week for their July rates decision and are largely expected to remain on hold. The meeting will also include an update of the quarterly economic forecasts which, considering the moves in Oil, could see some upward revision to the medium-term inflation forecasts.
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