On a year-to-date basis the USD has weakened against all of theprimary currencies (with the exception of CAD) accordingly long USD positions have been frustrating. The net USD position is nowflat. A neutral position in S&P and a large net short in copper suggesta market that has been caught wrong footed in several asset classes.
The outlook for the growth and commodity currencies is shiftinginto a more favourable light; on the back of this bearish AUD and CAD sentiment has faded; however CAD is still held net short -$3.4bn, while the AUD position is essentially flat (net short -$0.5bn) and MXN has shifted to a net long position.
Although EUR remains the largest held net long currency at$5.7bn, bullish sentiment has moderated for the second consecutive week and is beginning to fade the prior six weeks’ gain. EUR bears remain reluctant to act, and so it is a thinning in the ranks ofEUR bulls that has provided for the shift in sentiment—highlightinga nascent source of downside EUR risk if bears find some resolve.
The largest w/w build in bearish JPY positions since November2012 has been responsible for this week’s $2.3bn widening in thenet short position to $10.7bn, suggesting that investors are respondingto a shifting outlook for growth and risk.
Read the full report: FX Daily
Scotiabank