USD shorts trimmed, EUR longs reduced - Rabobank

According to the IMM net speculators’ positioning as at October 31, 2017, speculators turned decided less bearish on the USD last week, cutting their net shorts to the lowest level since they first turned negative in mid-July, notes the research team at Rabobank. 

Key Quotes

“Hopes for US tax reform are mixing with market expectations of a December rate hike by the Fed.”

“In tandem with the less bearish tone of the USD, speculators have reduced their net long EUR positions for a third consecutive week. The tone of ECB President Draghi at the October 26 policy meeting was more dovish than the market had expected.”

“Net GBP positions pushed back into positive territory having dipped below it the previous week. As expected the BoE delivered a 25 bps rate hike on November 2. However, the sentiments expressed by the Bank were dovish, limiting scope for significant GBP gains.  Brexit talks are likely to dominant GBP in the coming months.”

“Net JPY shorts have increased for a second week to their highest level since late July. A decline in geopolitical risk, strengthening risk appetite on the back of strong world growth and accommodative policy conditions at the BoJ continue to support the use of the JPY as a funding currency.”

“CHF positions have been in negative territory for thirteen consecutive week and the size of these positions has grown significantly over the past two weeks. This is consistent with higher levels of risk appetite and a backdrop of solid growth in the Eurozone. The worries around Catalonia have not triggered any contagion.”

“CAD longs have slipped but could find some support going forward from the strength in the October jobs report. AUD longs have fallen back for a fifth consecutive week. Soft retail sales numbers are a concern and underpin the view that there is little chance of a RBA policy move in the foreseeable future. Chinese economic data and prices of iron ore and coal also remain in focus.”