USD shorts decline, EUR longs failed to hold gains - Rabobank

According to IMM net speculators’ positioning as at March 6, 2018, net short USD positions declined to their smallest level since early January. 

Key Quotes

“This follows the trend in the spot market where the USD has been buffeted by talk of a more hawkish Fed. Fears of a global trade war have supported the USD vs. a number of high risk currencies.”

“EUR longs failed to hold most of the previous week gains, though they held above the levels of early February. The ECB last week removed the reference to potentially increasing QE from its policy statement, but ECB President Draghi managed to put a dovish spin on this news.”

“Net GBP longs lost their footing after the previous week’s recovery, dropping to their lowest level since late November. Despite expectations of another BoE rate hike in May, uncertainty related to the EU/UK trade talks could still weigh heavily on the pound going forward.”

“Net JPY shorts fell for a third consecutive week, holding at their lowest levels since October. Interest rate differentials should be negative for the JPY given the BoJ’s commitment to its QQE programme. That said, the market is doubting how long the Bank will maintain this position. Demand for safe haven remains a primary source of support for the JPY with fear of trade wars becoming a particular concern in recent weeks.”

“CHF net shorts almost halved, falling back to their lowest level since October. Net positions have been in negative territory for thirty-one consecutive weeks. Falls in risk appetite tend to be CHF supportive but fear of SNB intervention could prevent strong surges in demand for the CHF going forward.”

“CAD longs dropped back for a fourth consecutive week. Oil prices, Nafta and trade wars remain in view.   AUD long positions dropped for a second week. The threat of global trade wars created fresh anxiety last week though exemptions from US tariffs on steel and aluminium have been granted for Australia and Canada.”