Stronger dollar trend endures

Markit reported the preliminary Manufacturing PMI rose to 53.2 from 51.5 in September despite the stronger dollar. The housing market is also expected to add to economic growth with building permits jumping 6.3% on month in September from 0.7% the previous month despite a continued decline of 9% in housing starts after 5.6% fall the previous month. Lower consumer confidence, which declined to 98.6 from 103.5 in September as reported by the Conference Board, was the only major weak indicator which may signal a change in US economic recovery trend if the labor market improvement stalls. With data pointing US economic recovery continues investors increased the dollar bullish bets. As is evident from the Sentiment table, sentiment deteriorated for the euro and Swiss franc. And the Australian dollar and Japanese yen remain the only two major currencies held net long against the US dollar.

The euro sentiment deteriorated considerably after the European Central Bank policy meeting. The ECB president Draghi confirmed earlier rebuttals by central bank it doesn’t intend to taper 80 billion euro monthly purchases before the end of the program in March 2017. He also stated the interest rates will be kept low as long as inflation is lower than the bank’s target level of just below the 2%. The net short euro position rose by $1.9bn to $16.9bn. Investors increased both the gross longs and shorts by 14700 and 29288 contracts respectively. The British Pound sentiment continued to improve as unemployment in August remained steady at 4.9% and retail sales recorded no decline in September. The Pound net shorts fell by $0.6 billion to $6.4 billion. The net short position in British Pound narrowed as investors increased both the gross longs and shorts by 11026 and 3430 contracts respectively. The bullish Japanese yen sentiment strengthened considerably with the net long position in Japanese yen rising by $0.9bn to $5.4bn. Investors increased the gross longs and covered shorts by 7419 and 85 contracts respectively.

The Canadian dollar sentiment improved marginally after the Bank of Canada policy meeting where rates were kept unchanged. The net shorts in Canadian dollars narrowed by $0.1bn to $1.0bn against the dollar. Investors built considerably both the gross longs and shorts. The bullish sentiment improved for the Australian dollar with net longs rising at half the previous week’s pace recording a $0.14bn gain to $2.4bn. Investors increased both the gross longs and gross shorts. The sentiment toward the Swiss franc continued to deteriorate with the net shorts widening by $0.3bn to $2.4bn. Investors built both the gross longs and shorts.