EUR/USD

Non-Commercials increased their net long positions in the Euro last week buying a further 14k contracts to take the total position to 59k contracts. Following a near 50% reduction in long positions the prior week, EUR demand has resumed as market expectations have now shifted regarding the ECB’s monetary policy approach.

Following the ECB’s recent meeting which saw the bank striking a more neutral than dovish tone, ECB President Mario Draghi sparked a sharp rally midweek during the ECB forum. Draghi noted that the bank is no longer as concerned about low inflation, which they now view to be only temporary. Draghi’s comments come on the back of a series of increasingly positive economic releases from the eurozone and have further heightened investor expectations that the Bank is shifting back towards a tightening bias.

GBP/USD

Non-Commercials increased their short positions in Sterling last week selling a further 2k contracts to take the total position to -40k contracts. Selling pressure in GBP has eased over recent weeks as political uncertainty in the UK has dissipated.

Against a calmer political backdrop, the Bank of England has also indicated a shift towards a potential hawkish bias, further supporting GBP. The BOE governor recently commented that “some removal of monetary stimulus is likely to become necessary”. These comments were reiterated by BOE economist Haldane who said that “we need to look seriously at the possibility of raising interest rates to keep the lid on those cost of living increases”.

USD/JPY

Non-Commercials increased their net short positions in the Japanese Yen last week selling a further 12k contracts to take the total position to -62k contracts. Against a backdrop of other central banks in the G4 indicating a shift back towards a tightening bias, the BOJ have reaffirmed their commitment to maintaining their current policy stance as noted in comments made by BOJ board member Harada. In the absence of any key domestic data, this week JPY movement is likely to remain driven by this policy shift.

USD/CHF

Non-Commercials increased their net short positions in the Swiss Franc last week selling 2k contracts to take the total position to -5k contracts. CHF short positions had been steadily reduced over recent weeks prior to last week’s increase again reflecting the divergence between SNB policy bias and that of the other key central banks. Inflation data midweek is the key data focus, expected to fall back to 0.3% from 0.5%, followed by the unemployment rate on Friday.

AUD/USD

Non-Commercials increased their net long positions in the Australian Dollar last week buying a further 4.7k contracts to take the total position to 20k contracts. AUD demand has increased recently as the RBA has maintained a fairly positive tone in recent meeting and investors are anticipating that the RBA will soon follow in the footsteps of the BOC, ECB, BOE & The Fed and take a hawkish shift. Former RBA board member Edwards commented last week that the RBA could increase interest rates eight times over the next two years.

USD/CAD

Non-Commercials reduced their net short positions in the Canadian Dollar last week buying 34k contracts to take the total position to -50k contracts. Positioning has been fluctuating wildly in CAD over recent months. After moving to record short levels, investors are now rapidly pairing their short positions to reflect the shift in tone by the BOC.

Speaking last week, BOC Governor Poloz declared that the 2015 rate cuts had done their job, causing a spike in rate hike expectations for July which jumped to 69% in response to the comments. Recent economic releases have further endorsed Poloz’s comments with GDP data for April showing that the economy grew for the sixth straight month. This week the key data focus will be on the Unemployment rate on Friday.