The net long USD position — at $13.7bn — narrowed for the fourth consecutive week but most positions remain relatively neutral, close to the median of the last 52-weeks. The one exception is GBP; where positioning is bullish and building. On net, investors are bearish JPY, CAD and AUD; bullish NZD, EUR and GBP and neutral CHF and MXN.
Investors added to long EUR positions (likely on the back of EM risk) but immaterially so when judged by the flip-flop in sentiment over the last two months.
While investors may appear to be moderating their bearish sentiment toward commodity currencies CAD & AUD, the underlying details highlight the importance of domestic stories. For CAD, investors appear to be paring back risk as they re-assess the near term outlook, while for AUD a four-week trend of short covering continues to be the primary driver of waning bearish sentiment.
For CHF, the neutral position masks underlying risk being taken and highlights the impact of the opposing drivers of an improved European outlook that is occurring in tandem with a rise in EM concerns.
Read the full report: FX Research
Scotiabank