FX COT Update: JPY Shorts Continue To Lighten Amid Increased Geopolitical Tensions

EUR/USD

Non-Commercials reduced their net long position in the Euro last week selling 14k contracts to take the total position to -79k contracts. This latest adjustment comes after the latest ECB meeting disappointed bulls.

The central bank noted that they are still concerned with the subdued inflationary environment in the eurozone as well as the strength of the currency which has risen over 6% against the US Dollar so far this year. The release of the meeting minutes last also showed that the ECB feel investors have been too aggressive in their expectations of the ECB winding down its QE program and are concerned about “a possible overshooting”.

This week, the focus will be on a raft of PMI data due out of the eurozone as well as ECB chief Draghi who speaks on Wednesday and then again during the Jackson Hole Symposium on Friday. Investors will be keenly listening to Draghi for clues as to whether the bank is likely to announce a winding down of QE at the September meeting. Many expect that the ECB President will also use the event to further warn against EUR strength.

GBP/USD

Non-Commercials increased their net short positions in Sterling last week selling 7k contracts to take the total position to -32k contracts. GBP has been net sold for three out of the last four weeks as Brexit uncertainty has weighed on investor sentiment. The Bank of England recently warned that despite better economic data recently,

Inflationary momentum has also stalled, and CPI has now missed for two months in a row, remaining at 2.6% in July, undershooting forecasts of a rise to 2.7. This week focus will be on government borrowing data as well as GDP data for the 2Q due on Thursday.

USD/JPY

Non-Commercials reduced their net short positions in the Japanese Yen last week buying 18k contracts to take the total position to -77k contracts. JPY has been steadily bought each week of the last month as traders have responded to rise in global risk aversion as geopolitical tensions have increased over North Korea’s testing of nuclear missiles, has prompted a global flight to safety,