Head of Commodity Strategy
Summary: Speculators continue to show hesitancy in getting on board the current dollar rally. Despite seeing the Dollar Index hitting a three-year high the dollar long against ten IMM currency futures and the Dollar Index stayed well below last years peak.
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
Lukewarm best described speculators reaction to the continued dollar rally in the week to February 18. While buying of the Greenback extended into a fifth week the pace of long accumulation, considering the DXY hitting a three-year high, remained relatively slow. The combined long against ten IMM currency futures and the Dollar Index rose by $2.1 billion to $13.6, a two months high, but still well below the April 2019 peak at $38 billion.
The selling was, with the exception of Sterling, broad-based but not particularly aggressive. This approach was perhaps already vindicated Friday when a surprisingly weak U.S. Services PMI helped send the dollar sharply lower.
The biggest short – by far – was held in the euro at $12.4 billion equivalent. It was followed by the Japanese yen at $3.1 billion and the Aussie dollar at $2.5 billion. The reaction to the breakout in USDJPY above the downtrend from 2015 occurred on Wednesday, the day after this reporting week ended.
Leveraged funds reduced their net-short in U.S. 10-year Note futures by 28k lots to 643k lots, an 18-month low.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
