Decisively bearish sentiment on sterling and the EUR prevailed - Rabobank

Piotr Matys, EM FX Strategist at Rabobank, lists down the IMM Net Speculators’ Positioning as at 12 July 2016.

Key Quotes

“Bearish sentiment towards the EUR prevailed as the net short positions increased to 87.7k (USD 12.12bn) in the week ending of July 12. This is the highest level since the end of January and reflects the view that market participants perceive the euro as vulnerable to the fallout of the Brexit vote, which may have negative implications for the Eurozone.

After trimming their short GBP positions ahead of the referendum held on June 23, market players have turned decisively bearish on sterling after the UK voted to leave the EU. The net short positions almost matched the year-to-date high set at the beginning of June. While GBP/USD produced a strong rebound after the BoE refrained from raising rates last Thursday and uncertainty in UK politics has somewhat diminished following the swift appointment of Theresa May as the new prime minister, a sustainable recovery in sterling is an unlikely scenario in our view as the UK faces challenging period due to Brexit.

Rapidly growing market speculation that Japan may announce more monetary and fiscal stimulus triggered a sharp increase in JPY shorts while longs have been trimmed.

Bearish bets against the CAD and the AUD have fallen as market sentiment improved on the back of expectations that major central banks will inject a fresh dose of stimulus.

The net long USD positions edged higher to almost 14k, which is still well below the levels recorded at the beginning of 2015 when global financial markets were in turmoil.”