UPSIDE RISK FOR GBP
• Markets were hesitant to build on existing positions and instead either made few changes to positions or in a few cases took some risk off. The strongest trend is outside of FX with a building long gold position (see page 5 for chart). Beyond that the market is short JPY, CAD and AUD (see bottom charts on page 2) and relatively neutral or non-committal to other positions (flip-flopping week to week).
• GBP has rallied to a fresh three year high yet the net long GBP position is modest, sitting at just $1.1bn. This implies markets could follow spot higher by building on long positions and therefore adding upward momentum to an already strong GBP.
• The market cut its short EUR position in half; but overall risk allocated to EUR remains small with a modest net short of just – $1.2bn.
• AUD shorts took profit for a fourth week; but this shift was modest, with no evidence of massive short covering. Overall AUD sentiment remains bearish with a net short of $-4.2bn. CAD traders made only minor changes to their positions, with the currency still the second largest net short at -$5.3bn.
Read the full report: FX Research
Scotiabank