--EURUSD--
Non-Commercials reduced their net long positions in the Euro last week selling 0.5k contracts to take the total position to 91k contracts. At their recent meeting, the ECB kept hawkish expectations intact saying that a discussion on QE will be held during the autumn. The market is widely expecting the bank to signal a further aggressive tapering of its QE program, likely to start in the new year.
Data has continued to pick up over recent weeks with inflation tracking higher amidst an up tick in the global growth picture. Eurozone inflation came in as expected at 1.3% in July keeping hawkish expectations intact. Key data focus over the rest of the week will be a raft of PMI readings due on Thursday along with the ECB’s economic bulletin.
Last week the Fed indicated that they are likely to start their balance sheet normalisation at the September meeting which is broadly USD bullish, but USD weakness has persisted as the Fed downgraded its language regarding inflation which has now missed on four consecutive readings. Key focus now will be on the July employment reports due on Friday alongside PCE data earlier in the week, which the Fed uses as a key gauge of inflation; a weak print here will exacerbate the USD sell off.
--GBPUSD--
Non-Commercials increased their net short positions in Sterling last week selling 10k contracts to take the total position to -26k contracts. The slight fall back in inflation last month tempered hawkish expectations which have been building in GBP over the last month or so following Carney’s comments at the Sintra panel and the subsequent 5-3 split at the last rates meeting. The market is broadly expecting a more dovish vote this time around falling back to 6 – 2 as new member Tenreyro (replacing the hawkish Forbes) votes for the first time. Uncertainty still remains around Brexit negotiations, so for now the bank is seen choosing to remain on the sidelines to assess further incoming data.
Read more: https://www.orbex.com/blog/2017/07/fx-cot-update-jpy-bears-pause-as-usd-weakens/