EUR longs dropped back, negative on USD - Rabobank

According to IMM net speculators’ positioning as at March 20, 2018, the push by net USD positions into positive territory was short-lived. 

Key Quotes

“After just one week speculators again turned negative on the USD on concerns about lower US growth if a trade war escalated.”

“EUR longs dropped back having strengthened to their best levels since late January the previous week. Although ECB President Draghi has retained a dovish tone on policy, there is the possibility that the Eurozone’s large current account surplus will lend the EUR some safe haven behaviours if trade tensions worsen.”

“Net GBP longs jumped higher. News of a deal between the UK and EU on the Brexit Transition deal has come as a relief to the pound.”

“Net JPY shorts fell heavily, this being their fifth consecutive drop. Interest rate differentials should be negative for the JPY given the BoJ’s commitment to its QQE programme. That said, the market is doubting how long the Bank will maintain this position. Demand for safe haven remains a primary source of support for the JPY with fear of trade wars and a scandal involving Japan’s MoF becoming particular concerns in recent weeks.”

“CHF net shorts increased moderately, having dropped to their lowest level since October the previous week. Net positions have been in negative territory for thirty-three consecutive weeks. Falls in risk appetite tend to be CHF supportive but fear of SNB intervention could prevent strong surges in demand for the CHF going forward.”

“CAD longs moved higher. Oil prices, Nafta and trade wars have been in view, though stronger inflation data have turned attention back to the outlook for BoC policy. AUD longs surged, having fallen back into negative territory the previous week. The threat of global trade wars has created fresh anxiety this month though news that exemptions from US tariffs on steel and aluminium have been granted for Australia and Canada have been supportive. Also, hopes that Australian producers may be used by China as substitutes for US exporter has lent support to the AUD.”