Dollar bullish bets edge higher while data remain weak

After disappointing March jobs report data showed retail sales fell 0.2% in March. Moreover a sharp downward revision to February retail sales reading to minus 0.3% from 0.1% growth was a negative surprise. Falling consumer prices confirmed the negative impact of falling consumer spending: headline inflation contracted considerably in March to 2.4% from 2.7% in February. The core inflation rate, which excludes volatile food and energy prices, declined 0.2 percentage points to Fed’s target rate of 2%. Falling consumer prices point to soft consumer demand despite remarkably high consumer confidence readings lately. Despite weak data investors increased the dollar bullish bets amid rising geopolitical concerns. As is evident from the Sentiment table, sentiment deteriorated for all major currencies except for British Pound and Japanese yen. And the Australian dollar remains the only major currency held net long against the US dollar.

The euro sentiment continued to deteriorate as the decline of German headline inflation to 1.6% in March from 2.2% in February pointed to failure of euro-zone inflation to remain close to ECB’s 2% target rate. Low inflation rates confirm ECB head Draghi’s comment the central bank should not hurry with monetary tightening, boosting bearish expectations. The net short euro position widened $0.39bn to $2.9bn. Investors built both the gross longs and shorts by 12192 and 14886 contracts respectively. The British Pound sentiment improved as unemployment and average earnings remained steady in February. The net short position in British Pound narrowed $0.28bn to $7.98bn as investors increased both the gross longs and shorts by 16477 and 10066 contracts respectively. The bearish Japanese yen moderated as industrial production grew 4.0% on year from 3.7% previous month. The net short position in yen narrowed $0.45bn to $3.5bn. Investors built the gross longs and covered shorts by 2445 and 1856 contracts respectively.

The Canadian dollar sentiment continued to deteriorate as the Bank of Canada held the interest rate steady at 0.5%: the net short Canadian dollar position widened $58 million to $2.49bn. Investors increased both the gross longs and shorts. The bullish Australian dollar sentiment moderated as unemployment remained steady at 5.9% in March: net longs fell by $0.12bn to $3.27bn. Investors cut both the gross longs and shorts. The sentiment toward the Swiss franc deteriorated as the rise in producer and import prices held constant at 1.3% on year in March. The net shorts widened by $0.48bn to $1.73bn. Investors cut the gross longs and built shorts.