Risk sentiment strong despite trade war, rising yields
The latest and biggest round of US-China tariff threats has failed to dent risk sentiment, which was perhaps also boosted by China’s avowal not to devalue its currency as part of the trade war.
Head of Commodity Strategy
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Speculators increased the dollar long against nine IMM currency futures by $1.6 billion to $23.9bn in the week to August 14. This the most bullish dollar exposure in 20 months has led to short positions now being held in all but two of the nine contracts.
The increase was primarily driven by continued selling of 10-year notes and T-bonds Ultra, both of which reached a new record short. This came despite bond yields move lower in response to the deteriorating outlook for Turkey and other heavily indebted emerging market economies.