IFC Markets - Analytics

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    Investors bet against US dollar ahead of FOMC meeting

    Bullish bets on US dollar fell to $2.7 billion from $11.3 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 14. Investors reduced bullish bets on dollar ahead of Federal Reserve policy meeting of June 14-15 clearly not convinced by comments of several central bank officials who expressed their support for rate hikes in coming months despite surprisingly weak May jobs report. The CME Group’s FedWatch tool indicated fed funds futures market priced in only 3% chance for a rate hike in June and less than 20% chance for a July rate hike. The positive report on May retail sales indicating stronger than expected rise of 0.5% over month just as FOMC meeting started was not sufficient to significantly impact the likelihood of a decision to raise interest rates. As is evident from the Sentiment table, sentiment improved for all major currencies except for Canadian dollar. And the Swiss franc joined the Japanese yen and Canadian dollar as the third major currency held net long against the US dollar.

    The bearish euro sentiment improved slightly as the number of employed persons in the European Union increased 0.3% in April reaching the highest level since the end of 2008 and the EU industrial production in April recorded first growth in three months at 1.1% over month. The net short position in euro declined $1.6bn to $7.9bn. The euro net short position is still the largest net short against the dollar. The net short position in euro narrowed as investors built gross longs by 11018 contracts and increased the gross longs by 395 contracts respectively. The British Pound sentiment improved remarkably with less than two weeks left to the referendum of June 23 whether the country will remain in the European Union or not. The net short bets in British Pound almost halved falling by $2.7bn to $3.2 billion. The net short position in British Pound narrowed as the gross longs almost doubled while the gross shorts declined marginally. The bullish Japanese yen sentiment continued to improve as haven demand remained strong driven by increasing uncertainty over Brexit referendum. The net long position in Japanese yen increased at half the previous weeks’ pace rising by $1.5bn to $6.5bn. Investors increased the gross long positions by 9466 contracts and covered shorts by 3371.

    The sentiment continued to deteriorate for the Canadian dollar with the net longs falling by $259 million to $1.4 billion. Investors increased both the gross shorts and the gross longs. The bearish sentiment toward the Australian dollar moderated with net short bets falling by $680 million to $498 million. Investors built the gross longs and covered shorts. The sentiment turned bullish for the Swiss franc once again with $2.1 billion in long bets turning the $1.24bn net short position into $925 million net longs. Investors built the gross longs and cut the gross shorts.

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    market sentiment ratio long short positions

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