Relative monetary policy and global growth expectations havebeen the primary drivers of this week’s shifts in sentiment. Theultimate signal from the FOMC has been a more robust outlook—both for the US and globally, supporting growth sensitive currencieswhile adversely impacting others on the basis of relative monetarypolicy. The w/w changes provide important clues, while themodest decline in the aggregate USD position—to slightly bearish—highlights the mixed impact for the USD.
For CAD, a combination of the passing of the Poloz-inducedheadache and the ultimate signal of a more confident FOMC morethan halved the net short position—by $3.3bn to $3.0bn. Detailsincluded the greatest w/w short covering in three years and thelargest bullish build since late September 2013. AUD sentimentalso improved on similar details as a result of the improvement inglobal growth expectations, with the net short narrowing to itssmallest level since first turning bearish in May 2013.
For EUR, the fall in the net long position—to $6.9bn from a multi-month high of $9.2bn—resulted entirely from a paring back inlongs, suggesting a greater impact from the Fed-ECB relative outlookrather than a reaction to the dovish shift in tone from thepolicymakers of creditor nations.
The JPY net short position remains largest among its peers at$8.4bn, having widened $0.9bn w/w on a paring back in longs thathighlights the ongoing influence of oscillating geopolitical risk.
Read the full report: FX Research
Scotiabank