Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Head of Commodity Strategy
Summary: Speculators turned buyers of dollars for the first time in seven weeks during the week to January 21. With GBP and JPY selling being the main drivers the market was left unprepared for the risk off that followed news about the corona virus outbreak in China.
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.
Before corona virus worries became the major market driver speculators bought dollars for the first time in seven weeks. In the week to January 21 the dollar long against ten IMM currency futures and the Dollar Index rose by $0.9 billion to $3.8 billion. The change was primarily driven by another week of JPY selling together with the first weekly reduction in GBP longs since late November.
The AUD long reached a fresh 18 month high while the record long in MXN expanded again to reach the equivalent of $4.5 billion. Both are under pressure this Monday as commodities take a hit with iron ore, one of Australias biggest export goods, taking a 6% hit overnight in Asia. Emerging markets weakness has driven USD/MXN to near one-month high.