EUR/USD

Non-Commercials reduced their net long positions in the Euro last week selling 11k contracts to take the total position to 72k contracts. A resurgent US Dollar amid better US data and heightened expectations of a December rate hike has weighed on EUR sentiment following the ECB’s latest meeting which saw the market disappointed by the bank’s tapering announcement. The upcoming ECB conference this week is likely to keep downward pressure on the single currency as Draghi is expected to reiterate the bank’s commitment to maintaining accommodative monetary policy as core inflation remains subdued. On the data front, the key reading this week will be eurozone SQ GDP expected to remain unchanged both year over year and quarter over quarter.

GBP/USD

Non-Commercials reversed their net short positions in Sterling last week buying 3k contracts to take the total position to 1.3k contracts. Sterling short positioning has been steadily squared over the last month as investors adjusted their exposure ahead of the November BOE meeting which, as expected, saw the bank lifting rates. The BOE expect inflation remain above target and as such the bank is expected to maintain a course of policy tightening with the market so far pricing in 0.4% worth of hikes over the next two years. Upcoming speeches by BOE’s Carney, Haldane, Broadbent & Cunliffe will be closely watched and have the potential to drive repricing on any hawkish comments. On the data front, the key reading this week will be Inflation, due on Tuesday, which is expected to have increased further over October and should again, fuel further demand for GBP.

USD/JPY

Non-Commercials increased their net short positions in the Japanese Yen last week selling 2k contracts to take the total position to -119k contracts.  Short positioning in the Japanese Yen continues to grow as investors speculate on the growing policy divergence between the BOJ and other central banks in the G10 space. With the ECB tapering, the BOC & BOE having raised rates and the Fed widely expected to in December, the BOJ are among the few central banks who remain committed to further easing and as such, should keep JPY pressured to the downside.

USD/CHF

Non-Commercials increased their net short positions in the Swiss Franc last week selling a further 9k contracts to take the total position to -21k contracts. CHF short positioning has bloomed into a strong short position after spending most of the year hovering around neutral. As with the BOJ, the SNB’s commitment to easing creates stark policy divergence between them and most of the rest of the G10 space. The SNB has reiterated their message that they will remain active in the market as necessary as they feel that the CHF is still significantly overvalued.

AUD/USD

Non-Commercials reduced their long positions in the Australian Dollar selling -5.6 k contracts to take the total position to 52k contracts. AUD has been steadily sold over the last month as the market has started dialling back the hawkish RBA expectations which had been building over most of the year. Persistent data weakness which has been highlighted by the RBA and even led RBA’s Harper to comment that he feels the bank cannot rule out a further rate cut have combined to weigh on AUD.  The RBA recently downgraded its inflation forecast for 2018 and 2019 at its latest SoMP released last week though growth is expected to rise over the forecast horizon.

USD/CAD

Non-Commercials reduced their net long positions in the Canadian Dollar last week selling 14k contracts to take the total position to 58k contracts. CAD upside positioning has lost momentum over recent weeks seeing some position squaring as the market pares back its expectations of a further BOC rate rise before year-end with the bank continuing to reaffirm its cautious stance on further adjustments. In the short term, focus is likely to return to the NAFTA negotiations which resume this week after breaking down last month. On the data front, traders will be watching CPI data which is expected to have increased. A strong print here should see some upward repricing of rate hike probabilities ahead of year-end.