USD Net Long Positions Rise for Third Consecutive Week
According to economists Jane Foley and Molly Schwartz from Rabobank, USD net long positions have increased for the third week in a row. This rise is attributed to a decrease in short positions. The recent employment data, including ADP employment and NFP figures, came in softer than expected, leading to expectations of a 25 basis point rate cut from the Fed in September. There is now speculation of a possible 50 basis point cut, with traders pricing in a 40% likelihood of this move on September 18th.
EUR Net Long Positions Decline
On the other hand, EUR net long positions have decreased due to a fall in long positions. Eurozone final Q2 GDP also fell below expectations, registering at 0.2% q/q instead of the anticipated 0.3% q/q. The ECB’s decision to cut the deposit facility rate by 25 basis points was widely expected by economists and traders alike.
GBP Net Long Positions Show Decrease
GBP net long positions have also decreased, driven by a reduction in long positions. Despite this, GBP remains the best performing G10 currency against the USD year-to-date, with a return of 3.67%. The upcoming UK budget on October 30th is on the horizon, adding to the uncertainty in the market.
JPY Net Long Positions Reach Highest Level Since October 2016
JPY net long positions have increased for the fourth consecutive week, reaching their highest level since October 2016. USD/JPY is currently trading at yearly lows. While there is no expectation of a rate hike at the upcoming BoJ meeting on September 20th, traders will be closely watching for any hints of a possible move in October.
Analysis and Implications
The movements in net long positions for major currencies reflect the current economic landscape and market sentiment. Here are some key takeaways for investors and traders:
- The USD remains strong despite softer employment data, with expectations of a rate cut in September.
- The EUR is facing pressure due to disappointing GDP figures and the ECB’s recent rate cut decision.
- The GBP’s performance against the USD remains solid, but uncertainties surrounding the upcoming UK budget may impact its future trajectory.
- The JPY has seen a significant increase in net long positions, signaling a shift in market sentiment towards safe-haven assets.
Investors should closely monitor these developments and adjust their strategies accordingly to navigate the changing market conditions and potential opportunities for growth or risk mitigation.