USD Net Longs Decline After FOMC Meeting

The Commodity Futures Trading Commission (CFTC) report covering data up to May 5 showed that investors reduced US dollar net long position to $32.25 billion from $34.75. Investors cut net long bets on US dollar as economic data released on April 29 indicated US economy slowed in the first quarter with the GDP growing at 0.2% annual pace following a 2.2% growth in the fourth quarter. The Fed policymakers acknowledged the soft patches in US economy in the FOMC meeting statement the same day, reiterating that it will be appropriate to raise interest rates when the Committee has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. Not surprisingly this was considered a dovish statement in light of recent disappointing performance of US economy. Net US dollar longs declined for the sixth straight week in a row and hit the lowest level since September 2014. As is evident from the Sentiment table, improvement in sentiment toward major currencies continued, with Australian dollar joining the Swiss franc as the second major currency held net long against US dollar.

The euro sentiment continued to improve as deflation fears subsided in euro-zone with improved performance of euro-zone economies. The euro net short position narrowed $0.55bn to $26.6bn, with euro still comprising the bulk of net short positions against US dollar. The narrowing of euro net short position resulted mainly from short covering.

The sentiment toward the Japanese yen deteriorated significantly. The yen net short position widened $2.7bn to $3.3bn as investors increased gross shorts and reduced gross long positions. Net short bets in Japanese yen are now the second highest among the major currencies. The British Pound bearish sentiment moderated. The Pound net short bets narrowed $0.9bn to $2.35bn as investors increased gross longs and reduced gross short positions, making the Pound net short bets the third highest among the major currencies.

The sentiment towards Australian dollar and Canadian dollar continued to improve as their net short positions narrowed by $2.2bn and $0.9bn with Australian dollar held net long with $50 million position while the Canadian dollar net short bets fell to $0.8 bn. While investors reduced gross shorts and increased gross long bets in Australian dollars, the change in net short bets in Canadian dollars came mainly from short covering.