Net USD long positions crept higher having edged down to their lowest level since July 2021 the previous week. The dollar has been performing well in the spot market. Safe-haven demand linked with US debt ceiling concerns may have contributed, but the market is also starting to fear another Fed rate hike in June or July. We expect Fed rate cuts to be priced out for this year.
Net EUR long positions dropped back having reached their highest levels since September 2020 earlier in the month. Hawkish commentary from ECB officials remains prevalent but further rate hikes are already priced in. The market is now facing the prospect of stagnation in the Eurozone whilst positioned long of EURs.
Net GBP speculators’ positions have now been positive for six consecutive weeks. This marks a notable improvement in sentiment relative to the start of the year, but already appetite for GBP has started to waver. Very sticky UK inflation data have triggered concerns that the BoE may have little option but to push the economy into recession in order to control price pressures.
JPY net short positions surged last week to their highest levels since last October. Speculators this year lost faith in the view that the BoJ may soon announce a less accommodative monetary policy. That said, talk is emerging of a possible discussion about policy in the BoJ’s July meeting given that the CPI inflation forecast will likely be raised again.
CHF net shorts pushed further lower. They are at their smallest level since September 2021. The SNB remains hawkish but safe haven flow linked with US debt ceiling concerns may also have been a factor.
Speculators’ net short CAD positions increased again but remain below the level reached earlier in May. Oil prices and BoC policy are in view. Net AUD short positions edged lower having moved up to their highest levels since September the previous week as signs of softening in the labour market and disappointing Chinese economic data encouraged the view that the RBA may be moving towards a peak in the policy rate.