EUR/USD

Non-Commercials increased their net long positions in the Euro buying a further 1k contracts to take the total position to 74k contracts. With EZ data continued to print strongly, traders have been building hawkish expectations, awaiting an announcement of further tapering by the ECB.

Despite the absence of such an announcement at the June MPR, Euro bulls were encouraged as the ECB omitted their usual reference to the possibility of rates being even lower. The ECB also upgraded its macro assessment from negative to neutral, saying that risks were now “broadly balanced”.

However, despite the positive messages, the bank did lower its inflation forecasts over the full horizon period saying that despite economic improvements there has yet to be any significant uptick in inflationary pressure in the EZ.

This week, an absence of key EZ data will leave the focus on the US with the FOMC meeting on Wednesday, the headline event. Despite recent weakness in inflation, markets are widely expecting the Fed to progress its tightening cycle and raise rates a further 25 bps – 50 bps.

GBP/USD

Non-Commercials increased their net short positions in Sterling last week selling a further 7k contracts to take the total position to -37k contracts. Sterling has now been net-sold for two consecutive weeks as investor uncertainty intensified ahead of the UK elections. The Conservative lead, as shown by the polls, had dramatically narrowed over the course of the campaign making the outcome hard to gauge.

The results revealed that the leading Conservative party was unable to achieve a majority and are now in talks to secure a coalition majority with the DUP. The outcome has further heightened investor uncertainty, and GBP is likely to remain under pressure as traders await details on the new government and the first steps in the Brexit negotiations which, for now, have taken a backseat.

USD/JPY

Non-Commercials increased their net short positions in the Japanese Yen last week selling a further 3k contracts, to take the total position to -55 contracts. Continued strength in both equity and commodity prices have kept the Yen under pressure recently in the absence of a safe-haven bid. The latest growth data showed that the domestic economy advanced less than expected over Q1 growing at just 0.3% QoQ vs. the 1% forecast. The weakness was attributed to both diminished domestic demand and fixed asset investment.

USD/CHF

Non-Commercials reduced their net short positions in the Swiss Franc last week buying 2k contracts to take the total position to – 17k contracts. The Swissy has now been net-bought for three consecutive weeks. The SNB meet on Thursday for their June MPR and are widely expected to keep policy on hold.

Recent data has been mostly positive with inflation dropping in April before recovering slightly in May. The Unemployment rate also moved lower, and growth increased mildly. Recent data shows that the SNB has been scaling back the level of its market interventions though the bank is likely to reiterate their usual message, warning against further CHF strengthening and reaffirming their willingness to act.

AUD/USD

Non-Commercials reduced their net long positions in the Australian Dollar last week and flipped net-short, selling 3k contracts to take the total position to -0.1k contracts. This latest shift in sentiment marks the third time that institutional investors have been net-short the Aussie since the start of 2016. The fluctuation in sentiment has been reflected in the stagnant price action which has been stuck in a ranging pattern since early last year. At their recent meeting, the RBA kept policy on hold for the 10-consecutive meeting. The country also recently broke the record for the longest run of recession free quarters with 103 quarters of economic growth.

USD/CAD

Non-Commercials reduced their net short positions in the Canadian Dollar last week buying 4k contracts to take the total position – 95k contracts. Institutional investors recently took their CAD short position to record levels before two weeks of mild position squaring. The move is likely linked to a significant jump in employment which has lifted sentiment on the currency though the BOC have retained a mildly dovish tone. The recent decline in Oil prices is likely to translate into downside pressure on the Canadian Dollar, keeping the BOC’s current bias intact.