* Shifts in sentiment were biased against the USD following the Summers resignation and heading into Wednesday’s FOMC, with the aggregate long USD position halving to $10.7bn from $21.7bn
the previous week. AUD, EUR and GBP saw the largest swings — driven primarily by rising gross longs — hinting toward rising bullish sentiment. Most of the majors have moved away from their most extreme bearish levels observed over the past year, with the exception of NZD and MXN.
* The CAD net short position narrowed $1.2bn to $1.8bn: One of the few majors to have seen its position improve on the back of short covering, likely due to a lack of risk appetite ahead of the BoC Gov. Poloz speech as well as the FOMC. For AUD, a swift moderation in bearish sentiment was driven primarily by investors adding to long positions, sending the net short position to its narrowest level since late February and closing the gap with CAD (see p2).
* The EUR net long position rose $3.2bn to $5.3bn: EUR is the only major with a significantly large long position, and this week’s build—driven by gross longs—is suggestive of rising bullish sentiment. For GBP, the $3.1bn narrowing in the net short position provided for a moderation in sentiment from the extreme levels observed in June and back toward levels seen in February.
* JPY sentiment remains bearish, as the net short $11.2bn position was largely unchanged on a w/w basis.
Read the full report: FX Research
Scotiabank