US dollar bullish bets rose to $15.04 billion from $ 14.68 billion against the major currencies during the previous week, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to April 11 released on Friday April 14. Economic data were negative during the week as the increase in nonfarm payrolls in March was much lower than expected. However, the hawkish minutes from the Federal Reserve March meeting provided support to the dollar, indicating the central bank plans reducing the balance sheet later this year.
The nonfarm payrolls added just 98 thousand jobs in March while 180 thousand new jobs were expected. And average hourly earnings rose only 0.2% as previous month’s reading was revised upward by one tenth to 0.3%. Slowing of services sector’s expansion was another negative development as both the Markit’s and ISM Services Indexes declined from 53.8 and 57.6 to 52.8 and 55.2 respectively in March. Another sign of slowing real economic sector was the 0.4% rise in wholesale inventories in February. The dollar got a lift however from hawkish Fed minutes as they revealed policy makers plan to reduce central bank’s $4.5 trillion balance sheet later this year. Several policy makers expressed confidence in the continued strengthening of inflation and labor market, and minutes confirmed they still expect rates to rise gradually, unless the economy suddenly overheats. Investors increased the dollar bullish bets for fourth time in fourteen weeks. As is evident from the Sentiment table, sentiment deteriorated for all currencies except of the Japanese yen and Swiss franc. And the Australian dollar is still the only major currency held net long against the US dollar.
The euro sentiment continued to deteriorate despite continued service sector expansion in March and improved economic sentiment for April as the ECB head Draghi’s comment the central bank should not harry with monetary tightening strengthened bearish expectations. The net short euro position widened $0.99bn to $2.51bn. Investors built both the gross longs and shorts by 18126 and 25677 contracts respectively. The British Pound sentiment deteriorated as both the manufacturing and industrial production fell in March while core inflation declined to 1.8% from 2% in previous month as headline inflation remained steady at 2.3%. The net short position in British Pound widened $0.5.bn to $8.27bn as investors increased both the gross longs and shorts by 1130 and 7358 contracts respectively. The Japanese yen sentiment improved considerably as machine tool orders jumped to 22.6% in March from 9.1% the previous month. The net short position in yen narrowed $1.2bn to $3.97bn. Investors built the gross longs and covered shorts by 2003 and 9033 contracts respectively.
The Canadian dollar sentiment continued to deteriorate as the unemployment rose one tenth to 6.7% in March: the net short Canadian dollar position widened $0.17bn to $2.43bn. Investors cut both the gross longs and shorts. The bullish Australian dollar sentiment moderated as businesses indicated declining confidence in March: net longs fell by $033bn to $3.38bn. Investors cut the gross longs and covered shorts. The sentiment toward the Swiss franc improved as unemployment declined to 3.4% in March from 3.6% the previous month. The net shorts narrowed by $0.47bn to $1.26bn. Investors built both the gross longs and shorts.
CFTC Sentiment vs Exchange Rate
|April 11 2017||Bias||Ex RateTrend||Position $ mln||Weekly Change|
Source: Market analysis