Dollar bullish bets fall drastically on hawkish central bank talk

US dollar bullish bets fell sharply to $76 million from $4.53 billion against the major currencies during the previous week, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up June 27 released on Friday June 30. Economic data were mixed during the week as major central banks signaled impending shift to monetary tightening.

The US final Q1 GDP was upgraded to 1.4% from the second estimate of 1.2%. The jump of June Manufacturing PMI to 57.8 from 54.9 in May suggested manufacturing sector expansion accelerated in June. However other data were weak: total vehicle sales fell in June, as did pending home sales, personal consumption expenditure index and personal spending in May. Consumer sentiment as measured by Michigan University also moderated in June. In light of mixed data investors reduced net long dollar position. As is evident from the Sentiment table, sentiment improved for all major currencies except for the Japanese yen. And the euro and Australian dollar remain the two major currencies held net long against the US dollar.

The euro bullish sentiment strengthened remarkably after remark by European Central Bank President Draghi the ECB could adjust its policy tools of sub-zero interest rates and massive bond purchases as economic prospects improve in Europe. This was interpreted as a hawkish signal for euro. The net long euro position rose $2.71bn to $11.0bn. Investors built the gross longs and cut shorts by 6254 and 12515 contracts respectively. The British Pound sentiment improved considerably following a hawkish comment by the Bank of England Governor Carney that there’s a limit to the BOE’s tolerance for above-target inflation. The net short position in British Pound narrowed $0.89bn to $2.24bn as investors increased the gross longs and covered shorts by 10318 and 1048 contracts respectively. The bearish Japanese yen sentiment deteriorated as the headline inflation remained steady at 0.4% in May while unemployment rose 0.3 percentage points to 3.1%. The net short position in yen widened $1.44bn to $8.27bn. Investors built both the gross longs and shorts by 5394 and 19080 contracts respectively.

The Canadian dollar sentiment improved noticeably after unexpected hawkish comment by Bank of Canada Governor Poloz that the Canadian economy enjoyed “surprisingly” strong growth in the first three months of 2017 and he expected the pace to stay above potential to deteriorate as the consumer price index’s rise slowed in May. The net short Canadian dollar position narrowed $0.73bn to $3.03bn. Investors increased the gross longs and covered short. The bullish Australian dollar sentiment intensified as the central bank left the interest rates at record low 1.5% and didn’t signal a tightening bias unlike its peers. The net longs rose by $0.98bn to $2.48bn. Investors built the gross longs and covered shorts. The sentiment toward the Swiss franc improved as the May retail sales recorded 0.3% growth on month after upwardly revised 2.7% drop previous month. The net shorts almost got wiped out falling $0.59bn to $15 million. Investors cut both the gross longs and shorts.

CFTC Sentiment vs Exchange Rate

July 03 2017 Bias Ex RateTrend Position $ mln Weekly Change
CAD bearish positive -3027 725
AUD bullish negative 2480 984
EUR bullish positive 11003 2709
GBP bearish negative -2245 888
CHF bearish negative -15 593
JPY bearish negative -8273 -1442
    Total -76  

commitment of traders net long short

commitment of traders weekly change

market sentiment ratio long short positions

Source: Market analysis

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