Head of Commodity Strategy
Summary: The Commitments of Traders reports highlight speculators positions and changes made during the week to September 22 in FX, bonds and stocks. A week were a worsening risk appetite helped send the dollar higher and global stocks lower. Surprisingly the broad dollar rally did not attract an expected wave of short-covering from speculators holding an elevated short. Instead they chose to sell into the rally thereby increasing long positions in EUR, CHF and JPY.
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.
This summary highlights futures positions and changes made by speculators in forex, bonds and stocks up until last Tuesday, September 22. A week were risk sentiment received a setback after stock markets worldwide tumbled in response to a worsening pandemic, the U.S. Congress struggling to deliver more stimulus, U.S.-China tensions and an upcoming and most likely contentious U.S. election. In response to these developments, the S&P 500 dropped by 2.5%, the dollar index reached a two-month high while steady bond yields disguised a drop in breakeven (inflation expectations) and rising real yields.
During the week to September 22 the dollar rallied against all but one of the ten IMM currency futures tracked in this report. The Dollar index traded higher by 1% while the Mexican peso and Brazilian real both took a +3% hit. In response to this and perhaps somewhat surprising, speculators instead of reducing short dollar bets chose to increase it by 9% to $34.9 billion. Most of the Greenback selling occurred against the euro followed by Japanese yen and the Swiss franc while only the Canadian dollar and Russian Ruble saw net selling.
In the euro, speculators added fresh long positions as the EURUSD dropped towards €1.1700. As a result the net long jumped by 12,246 lots to 190,822 lots or €23.9 billion, just 10% below the recent record.
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.
