EUR/USD
Non-Commercials increased their net long positions in the Euro last week buying 9k contracts to take the total position to 88k contracts. While slightly down from recent highs, the EUR long position is being rebuilt heading into September as investors continue to anticipate a more aggressive winding down of QE by the ECB, to be announced at their upcoming September meeting.
Speaking at the Jackson Hole Economic Symposium Draghi noted that the “global recovery is firming upâ€, adding further fuel to hawkish expectations. The event delivered little in the way of policy guidance but was enough to fuel a strong rally in EUR. Earlier in the month, the ECB meeting minutes revealed the ECB’s concern about the strengthening Euro and the risk of market’s expectations “overshootingâ€, so this latest bout of EUR strength is likely to be watched closely by the central bank. On the data front this week, the focus will be on Eurozone Unemployment (July) and August CPI.
The US Dollar remains weakened as traders continue to expect the Fed to remain on hold over the remainder of the year. In response to the weak inflation environment, with CPI now having undershot expectations for five consecutive months.Speaking at the Jackson Hole symposium, the Fed chair
GBP/USD
Non-Commercials increased their net short positions in Sterling last week selling 14k contracts to take the total position to -46k contracts. Selling pressure has been building in GBP again over recent weeks as a combination of weaker data and Brexit uncertainty has fuelled an about turn in investor sentiment, following a recovery in GBP over the last few months. Round Three of Brexit negotiations is set to begin this week and while the UK is keen to pursue discussions on future trade conditions the two key issues will be citizens’ rights and the so-called “divorce billâ€. On the data front, traders will be focused on lending & mortgage data and Manufacturing PMI due later in the week.
