EUR/USD

Non-Commercials increased their net long positions in the Euro last week buying 9k contracts to take the total position to 88k contracts. While slightly down from recent highs, the EUR long position is being rebuilt heading into September as investors continue to anticipate a more aggressive winding down of QE by the ECB, to be announced at their upcoming September meeting.

Speaking at the Jackson Hole Economic Symposium Draghi noted that the “global recovery is firming up”, adding further fuel to hawkish expectations. The event delivered little in the way of policy guidance but was enough to fuel a strong rally in EUR. Earlier in the month, the ECB meeting minutes revealed the ECB’s concern about the strengthening Euro and the risk of market’s expectations “overshooting”, so this latest bout of EUR strength is likely to be watched closely by the central bank. On the data front this week, the focus will be on Eurozone Unemployment (July) and August CPI.

The US Dollar remains weakened as traders continue to expect the Fed to remain on hold over the remainder of the year. In response to the weak inflation environment, with CPI now having undershot expectations for five consecutive months.Speaking at the Jackson Hole symposium, the Fed chair

GBP/USD

Non-Commercials increased their net short positions in Sterling last week selling 14k contracts to take the total position to -46k contracts. Selling pressure has been building in GBP again over recent weeks as a combination of weaker data and Brexit uncertainty has fuelled an about turn in investor sentiment, following a recovery in GBP over the last few months. Round Three of Brexit negotiations is set to begin this week and while the UK is keen to pursue discussions on future trade conditions the two key issues will be citizens’ rights and the so-called “divorce bill”. On the data front, traders will be focused on lending & mortgage data and Manufacturing PMI due later in the week.

USD/JPY

Non-Commercials reduced their net short positions in the Japanese Yen last week buying 3.5k contracts to take the total position to -74k contracts as rising geopolitical tensions, and a weaker Dollar have combined to create an environment of demand for JPY. A lack of key domestic data this week should keep JPY trading linked to risk sentiment and USD flows, especially the US employment reports on Friday.

USD/CHF

Non-Commercials increased their net short positions in the Swiss Franc last week selling 1k contracts to take the total position to -2k contracts. Positioning adjustments in CHF continue to be minor and reflect the stronger popularity of JPY as a safe-haven in the current environment. With EUR rising pressure is off the SNB for now as investors are happy to sell CHF.

AUD/USD

Non-Commercials increased their net long positions in the Australian Dollar last week buying 1k contracts to take the total position to 60k contracts. AUD continues to be steadily bought against a backdrop of stronger economic data both domestically and in China, rising commodity prices and firming RBA rate hike expectations. Recent data showed that the Unemployment rate fell to 5.6% in July and was the 10th consecutive month of job creation in the Australian economy.

However, inflation remains a sticking point and CPI undershot expectations once again in July with the RBA having recently warned that the stronger exchange rate was having a depressing effect on inflation. An absence of key domestic data this week will leave AUD trading off the broader themes of risk sentiment and commodity prices.

USD/CAD

Non-Commercials increased reduced their net long positions in the Canadian Dollar last week selling 0.2k contracts to take the total position to 51k contracts. Bullish momentum has stalled in CAD as data weakness over the past few weeks has dampened markets’ expectations of further rate rises this year leading to profit taking on earlier-established long positions. A resurgence in threats by President Trump to pull out of the NAFTA agreement has also weighed on CAD. This week, an absence of key domestic data will leave the focus on the US jobs reports.