Forex Futures

EURUSD

Non-Commercials increased their net short positions in the Euro last week selling a further 2.6k contracts to take the total position to -22k. The resumption of selling in the Euro largely reflects elevated investor uncertainty ahead of the first round of voting in the French elections, held yesterday.

Polling results ahead of the April 23rd vote showed a narrowing of Macron’s lead over Le Pen with Fillon and Melenchon both seeing increased support. Macron and Le Pen won the first round as expected with 23.8% of the vote and Le Pen coming in second with 21.3%.  Le Pen and Macron will now face off in the second round, to be held on May 7th, with Macron widely expected to win, supporting EUR upside.

The ECB meets this week and markets will be keenly waiting to hear the bank’s latest outlook with money markets reflecting expectations of a hike in early 2018 following last night’s voting results in France.

GBPUSD

Non-Commercials reduced their net short positions in Sterling last week buying 6k contracts to take the total position to -99k contracts. GBP has been net bought for three out of the last four weeks reflecting a sharp shift in sentiment since the triggering of Article 50.  GBP has been strongly bought following the shock announcement last week by UK PM May that an early election will be held on June 8th.

Markets are interpreting the move as a show of strength by the Conservatives, likely to consolidate the UK’s position during Brexit negotiations. Alongside this, the continued positive economic data out of the UK is allaying fears of a downturn in response to Brexit and fuelling a covering of longer term GBP short positions. On the data front, this week traders will be watching Q1 GDP which is forecast to rise to 2.3% YoY.

USDJPY

Non-Commercials reduced their net short positions in Japanese Yen last week buying 4k contracts to take the total position to -30k contracts. JPY has been steadily bought over the last month reflecting heightened risk aversion in the markets in response to rising geopolitical tensions regarding US air strikes in Syrian and the sending of warships to North Korea as well as the French elections and Brexit negotiations in Europe.  The BOJ meet this week but are largely expected to maintain their outlook and keep policy unchanged.

USDCHF

Non-Commercials increased their net short positions in the Swiss Franc last week selling 4k contracts to take the total position to -14k contracts. The latest wave of selling in the Swiss Franc reflects the diminished view of the currency as a safe haven with money managers preferring JPY and Gold over recent periods of risk aversion.

On the data front this week, as well as the Swiss trade balance, traders will be watching SNB chief Jordan who speaks on Friday at the SNB’s AGM Jordan has recently commented that the bank stand willing to intervene on any excessive CHF strength in response to political risks in Europe though, in light of the French vote, this will likely be avoided.

AUDUSD

Non-Commercials reduced their net long positions in the Australian Dollar this week selling 2k contracts to take the total position to 43k contracts. AUD has lost bullish momentum over recent weeks as the sharp drop in iron ore prices has seen traders pairing back their RBA rate rise expectations. Strong trade data and rising commodity prices had seen traders ramping up their RBA tightening expectations at the start of the year but with iron now down around 30% over the last 6 weeks, traders are now reversing these expectations.

The RBA meeting minutes last week revealed that the bank is concerned with labour market conditions, as well as rising property prices, highlighting the difficulty for the bank in deciding on the correct monetary policy response. On the data front, this week traders will be watching Q1 CPI which is expected to jump to 2.2% YoY.

USDCAD

Non-Commercials increased their net short positions in the Canadian Dollar last week selling 1k contracts to take the total position to -33K contracts. CAD has been steadily sold over the last month following a huge reversal in long positions. Institutions remain net short the currency and have been increasing downside exposure.  The latest CPI readings last week saw CPI printing 1.6% vs. the expected 1.8% YoY.

The BOC recently noted that Canada is at a different stage in the business cycle to the US and as such the BOC will not be following the Fed, adding that raising rates prematurely would almost certainly cause a recession in the country. On the data front, this week traders will be watching GDP readings for February which is expected to increase to 2.6% YoY.

 

 

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