EURUSD
Non-Commercials increased their net long positions in the Euro last week buying a further 11k contracts to take the total position to 94k contracts long. Following some minor position squaring over the prior week, buying has now resumed in the Euro as traders continue to anticipate an announcement by the ECB at next month’s meeting regarding tapering of QE. Since Draghi’s comments at the Sintra forum, EUR has continued to strengthen and is now up over 6% on the year against USD. However, the strength of EUR is causing many to question the general expectation that the bank will reduce its QE operations at next month’s meeting.
Attention this week will be on the release of the accounts of the bank’s recent meeting where Draghi stated that accommodative policy would remain in place for some time. Traders will be keen to gauge further details from this meeting though further appreciation appears likely at this stage with the US Dollar continuing to weaken with inflation missing for the fourth consecutive month. Traders now await the FOMC meeting minutes this month for further details on the inflation outlook after the Fed acknowledged the rough patch at its recent meeting.
GBPUSD
Non-Commercials reduced their net short positions in Sterling last week buying 4k contracts to take the total position to -25k contracts. Positioning in Sterling has been fluctuating over recent weeks as uncertainty regarding Brexit negotiations alongside differing BOE views has caused choppy action in the currency.
The vote split fell back to 6-2 in the BOE’s recent meeting as recent data showed that the UK economy grew at its slowest pace since 2012 over H1 201. Hawkish expectations had been building; unemployment remaining at 40-year lows and inflation climbing, but BOE Governor Carney pointed out that business investment is likely to remain weak given Brexit uncertainties. This week, traders will be focused on the July CPI reading which forecast to increase to 2.7% from 2.6% prior.
Read more: https://www.orbex.com/blog/2017/08/fx-cot-update-jpy-buying-kicks/