• Central banks and geopolitics appear to have driven this week’s shifts in sentiment, specifically investors’ reactions to the BoE Mansion House speech, developments in Iraq, and positioning ahead of Wednesday’s Fed.
• Bullish GBP sentiment has risen to a seven year high, as market participants have reacted to BoE Gov. Carney’s pronouncement with regards to ‘sooner’ interest rate hikes. GBP is the largest held net long. The building net long suggests GBP is not yet vulnerable to short covering but extreme positions should be monitored closely.
• NZD — The significant build on the short side is a warning that NZD is vulnerable to near term downside.
• EUR sentiment is bearish, with the net position at its widest in a year (bottom right p2), $10.5bn. Investors appeared to have taken on some risk ahead of Wednesday’s Fed, given the w/w rise in both long and short positions.
• CAD sentiment has improved modestly on a w/w basis, with a $0.2bn narrowing in the net short to $2.0bn. CAD shorts have been relatively stable since April.
Read the full report: FX Research