EUR enthusiasm rose again, net USD positions turned more sour - Rabobank

According to the IMM net speculators’ positioning as at January 23, 2018, enthusiasm for the EUR rose again last week edging above the recent highs, notes the research team at Rabobank. 

Key Quotes

“Positive news regarding German coalition talks and less dovish than expected minutes from the December ECB meeting have recently fuelled the EUR in the spot market. ECB President Draghi made some attempt to push back against EUR strength at the January policy meeting, though this was judged to be half-hearted.”

“As emphasized by the pressure on the USD on the spot market, net USD positions turned more sour last week, though net shorts remain below the levels achieved at the end of November. The market is not convinced about the extent of any positive impact on Fed policy from the Republican’s tax reform given talk that firms will use corporation tax windfalls for share buybacks. Also, the impact of higher Fed rates in the FX market is being diluted by talk of less accommodative policies from other G10 central banks.”

“Net GBP longs gained for a fourth consecutive week, allowing them to hold at their highest levels since July 2014. Optimism that a Brexit transition period will be confirmed in the coming months has helped to support the pound. However, looking ahead EU/UK trade talks are likely to be tough and could widen existing cracks in PM May’s cabinet.”

“Net JPY shorts rose again last week, though they remain below their recent highs. Strong Japanese growth and a perceived drop in geopolitical risk are all negative for the safe haven JPY. However, speculation that BoJ could rein in the size of its QQE programme is likely limiting the build-up of short positions.”

“CHF net shorts edged a little higher last week. Net positions have been in negative territory for twenty-five consecutive weeks. Although shorts are below their November highs, they remain at relatively buoyant levels and have increased again this month. This is consistent with higher levels of risk appetite and a backdrop of solid growth in the Eurozone.”

“CAD longs pushed higher. Although the BoC hiked rates this month as expected, its tone remained cautious. AUD positions jumped further into positive ground. RBA policy speculation is in focus.”