EURUSD
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Non-Commercials reduced their net long positions in the Euro last week selling 23k contracts to take the total position to 63k contracts. EUR has now been net-sold for three out of the last four weeks despite strong signals by the ECB that they will announce further tapering at the upcoming October meeting. Uncertainty ahead of the German elections has provided some headwind to ER demand as traders anticipated the likelihood of the far-right AfD party gaining seats in the Bundestag. The voting did indeed see the AfD gaining seats and markets now await news of how a coalition government will be formed after Merkel’s CDU failed to gain an outright majority.
Draghi will be in the spotlight once again this week with a speech due on Monday, however, he is unlikely to deliver much new information and should reiterate the ECB’s statement that “the recent volatility in the exchange rate represent a source of uncertainty for medium-term price stabilityâ€.
GBPUSD
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Non-Commercials reduced their net short positions in Sterling last week buying 36k contracts to take the total position to -10k contracts. The record sterling short position has now been almost completely covered as traders react to the shifting tone of the BOE who have recently highlighted the necessity and expectation for a rate rise in the near future. At their recent meeting, the bank told the market that if the economy continues to perform in-line with currently projections, then some removal of monetary stimulus will likely be appropriate over the coming months. On the data front this week we have only the final release of the Q2 GDP figure on Friday, expected to be confirmed at 0.3% and have a little price impact.
USDJPY
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Non-Commercials reduced their net short positions in the Japanese Yen last week buying 6k contracts to take the total position to -51k contracts. JPY demand continues to increase as uncertainty linked to geopolitical tensions maintains a safe haven bid. The recent BOJ meeting took a dovish turn as, although rates were kept on hold and policy unchanged, one of the new voting members voted in favour of further easing at this stage. On the data front, this week traders will be watching August CPI and Industrial Production both due on Friday with inflation expected to have risen over the month.
