IFC Markets - Analytics

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    US dollar net longs rise despite disappointing jobs report

    US dollar net long position reached nearly four month high of $11.3 billion from $4.89 billion against the major currencies during the previous week, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to June 7. Investors increased bullish bets on dollar despite disappointing May jobs report which made a rate hike in June virtually impossible while several Federal Reserve officials mentioned earlier they supported a rate hike sooner rather than later if economy continued to improve. Nonfarm payroll rose only 38000, the smallest increase since September 2010. Besides a declining increase in monthly jobs for third consecutive month, the average hourly earnings also came in lower at 0.2% compared with 0.4% in April, pointing to low expectations for inflation increase necessary for a rate hike. And while Federal Reserve Chair Janet Yellen still said the Central Bank is on track to raise rates as US economy is in relatively good shape, markets actually diminished expectations of a rate hike at the June policy meeting: after Yellen’s remarks the likelihood of an interest-rate hike in June was only 4% compared with 21% before the Friday’s jobs report according to the CME Group’s FedWatch tool. However investors increased bullish bets on US dollar in the wake of disappointing jobs market report. As is evident from the Sentiment table, sentiment deteriorated for all major currencies except for Japanese yen. And the Swiss franc joined the Australian dollar, the euro and the British Pound as the fourth major currency held net short against the US dollar.

    The bearish euro sentiment deteriorated substantially as the European Central Bank maintained its monetary policy unchanged while data indicated euro-zone headline inflation still remained in negative territory in May at minus 0.1% after an 0.2% decline in April. The net short position in euro jumped $4.3bn to $9.5bn. The euro net short position remains the largest net short against the dollar. The net short position in euro widened as investors built gross shorts by 24732 contracts and cut the gross longs by 4726 contracts respectively. The British Pound sentiment also deteriorated significantly with only two weeks left to the referendum on whether the country will remain in the European Union or not. The net short bets in British Pound almost doubled rising by $3.0bn to $6.0 billion. The net short position in British Pound widened as the gross shorts almost doubled while the gross longs declined marginally. The bullish Japanese yen sentiment improved markedly. The net long position in Japanese yen rose for the first week in two months, rising by $3.3bn to $4.9bn. Investors increased the gross long positions by 18273 contracts and covered shorts by 6743.

    The sentiment deteriorated for the Canadian dollar with the net longs falling by $317 million to $1.6 billion. Investors increased the gross shorts and cut the gross longs. The bearish sentiment toward the Australian dollar intensified with net short bets rising by $834 million to $1.1bn. Investors built the gross shorts and reduced the gross longs The sentiment turned bearish also toward the Swiss franc with $1.2 billion in short bets turning the $16 million net long position into $1.24bn net shorts. Investors cut the gross longs and increased the gross shorts.

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