This data references the period ending Tuesday 24th January.
EUR/USD
Non-Commercials reduced their net short positions in the Euro last week buying 14.5k contracts to take the total position to -53k contracts. This round of short covering represents a more than 20% reduction in bearish positions. Following the ECB’s neutral policy message markets are increasingly cautious about upside risks in the Euro as data sets continue to perform strongly.
ECB’s Weidmann commented that the economic outlook for the Euro area is positive and that inflation is gradually approaching the ECB’s price stability target.  On the other hand, ECB’s Visco said that ECB policy will have to remain highly accommodating, highlighting the lack of wage growth and core inflation.
This week traders will be turning their attention to GDP data released on Tuesday. Eurozone GDP is expected to run at 0.3% – 0.5% quarter on quarter in seasonally adjusted, non-annualised terms. Traders will also be watching EuroZone CPI estimates for January also released on Tuesday.
GBP/USD
Non-Commercials reduced their net short positions in Sterling last week buying 3k contracts to take the total position to -63k contracts. Institutional positioning in Sterling has remained broadly flat over the last month moving between -66k and -63k. Markets are still plagued by uncertainty surrounding the upcoming Brexit negotiations. Last week the UK Supreme Court ruled that Parliament will have the right to vote on any Brexit plan, further clouding the outlook.
Despite the clear risks and uncertainty surrounding the issue, UK data has continued to print strongly. 4Q GDP came in above expectations at 0.6% vs 0.5%, quarter on quarter. The year over year figure also came in better than expected at 2.2% vs 2.1%. This latest data again highlights the resilience of the UK economy following the referendum decision last summer.
Traders this week will be closely watching the BOE meeting and inflation report. The meeting is likely to see the bank striking a more Dovish tone than the November meeting and upward revisions to both growth and inflation are likely. Â Alongside this headline event we also have the release of PMI data sets for January.
