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US net longs rise after Yellen’s speech
US dollar bullish bets rose to $15.26 billion from $13.0 billion against the major currencies during the previous week, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to March 7 released on Friday March 10. Economic data during the week were positive and Fed Chair Janet Yellen’s hawkish comments boosted March rate hike expectations.
In his first speech to joint session of Congress and Senate President Trump pledged to implement "massive" tax relief to the middle class and tax cuts for companies and to overhaul the immigration system, improve jobs and wages for Americans. Nevertheless the address shed no light on president’s priorities or timeliness for his policies. In economic data, the fourth-quarter GDP remained steady at 1.9% as trade deficit rose to $48.5 billion in January from $44.3 the previous month with personal income rising one tenth percentage point to 0.4%. Factory orders also rose in January though at lower pace of 1.2% compared with 1.3% from previous month. Stronger reading of manufacturing index by Institute for Supply Management confirmed the US manufacturing sector accelerated its expansion in February from previous month, paralleled also by stronger expansion in services sector. Against the background of positive economic data treasury yields inched higher after Federal Reserve Chair Janet Yellen’s hawkish speech boosted significantly rate hike expectations: the probability of a March rate increase rose to 86% from about 30% last week, according to CME Group’s FedWatch tool. Investors increased the dollar bullish bets for second time in nine weeks on positive economic data and hawkish comments by central bank officials. As is evident from the Sentiment table, sentiment deteriorated for all currencies except for the Swiss franc. And Canadian dollar together with the Australian dollar are still the only two major currencies held net long against the US dollar.
The euro sentiment deteriorated with the third estimate of euro-zone fourth quarter GDP indicating 1.7% year-on-year growth, in line with the preliminary estimate. The net short euro position widened by $1.10bn to $7.86bn. Investors cut the gross longs and built shorts by 5922 and 2415 contracts respectively. The British Pound sentiment further deteriorated with the net short position in British Pound widening $0.75bn to $6.2bn as investors built significantly both the gross longs and shorts by 18518 and 29284 contracts respectively. The bearish Japanese yen sentiment was intensified despite the final reading of GDP showed Japanese economy grew an annualized 1.2% on quarter in the fourth quarter, above preliminary estimates of 1%, the fourth straight quarter of expansion. The net short position widened $0.46bn to $5.99bn. Investors increased considerably both the gross longs and shorts by 10191 and 14874 contracts respectively.
The bullish Canadian dollar sentiment moderated slightly after data showed Canadian economy expanded 0.6% on quarter in the last three months of 2016, slowing from a 0.9% growth in the previous quarter and the central bank left interest rates unchanged. The net longs slipped by $83 million to $2.18bn against the dollar. Investors built both the gross longs and shorts. The bullish Australian dollar sentiment moderated despite the economy recorded higher than expected expansion at 1.1% in last three months of 2016 on quarter compared to a 0.5% contraction in the September quarter and the Reserve Bank of Australia left policy unchanged. The net longs fell by $0.1bn to $3.87bn. Investors cut both the gross longs and shorts. The sentiment toward the Swiss franc improved with the net shorts narrowing by $0.23bn to $1.24bn. Investors increased both the gross longs and shorts.
CFTC Sentiment vs Exchange Rate
March 07 2017 | Bias | Ex RateTrend | Position $ mln | Weekly Change |
CAD | bullish | positive | 2179 | -83 |
AUD | bullish | positive | 3866 | -104 |
EUR | bearish | negative | -7859 | -1097 |
GBP | bearish | negative | -6211 | -745 |
CHF | bearish | negative | -1236 | 232 |
JPY | bearish | negative | -5999 | -458 |
Total | -15259 |
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