Head of Commodity Strategy
Summary: The Commitments of Traders reports highlight speculators positions and changes made during the week to June 9 in FX, bonds and stocks. Appetite for risk temporarily received a knock amid worries around a re-acceleration of COVID-19 cases and continued uncertainty around the speed of recovery. Despite general dollar strength speculators accelerated their broad selling with the Greenback short doubling to levels last seen two years ago.
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 such as hedge funds and CTA’s across forex, bonds and stocks up until last Tuesday, June 16. Appetite for risk temporarily received a knock amid worries around a re-acceleration of COVID-19 cases and continued uncertainty around the speed of the U.S. and the global recovery. The S&P 500 ended the reporting week down 2.4% while the yield on U.S. ten-year notes reversed lower to their established 0.6% to 0.8% range.
Speculators almost doubled bearish bets on the Greenback, this despite seeing the dollar rise by 0.7% against an index of currencies. The combined dollar short against ten IMM currency futures and the Dollar Index jumped by $8.4 billion to $16.8 billion, the highest since May 2018.
The heavy selling was broad-based but with the bulk of the flow mostly benefiting the euro and Australian dollar. The euro net-long reached €14.6 billion, the highest since May 2018 while the Australian dollar’s 28% rally from the March low supported a further cut in the net short to 6.5 lots, also the lowest since May 2018. Despite the risk off theme driving markets during the week, the Mexican peso position managed to flip back to long and a 13-week high.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
