Head of Commodity Strategy
Summary: During the week to March 24 the US Federal Reserve rolled out some of its heaviest artillery to announce open ended QE. This lead to stocks hitting a through on March 23 while the dollar short rose for a second week despite general Greenback strength.
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.
The below summary highlights futures positions and changes made by hedge funds across forex, bonds and stocks up until last Tuesday, March 24. A period that saw the US Federal Reserve rolled out some of its heaviest artillery to announce ‘open ended’ QE. It was a reminder of the moves they made in March 2009 which finally succeeded in stabilizing the global markets. During the reporting week stocks hit a through on March 23, the dollar continued to strengthen.
In forex speculators, with just a couple of exceptions, continued to cut both long and short positions across all ten IMM currency futures. Despite seeing the dollar rally extend into a second week the net position turned a bit more negative at -$6.6 billion.
While the Dollar Index was bought and JPY and CAD were both sold, the net dollar position still ended more negative due to continued strong buying of the euro. Four weeks of buying has taken the euro net-long to 61,290 lots ($8.3 billion equivalent), the highest since June 2018.
Bullish wagers on the Mexican Peso declined for an 8th week as the currency sank by more than 7% to hit a record low against the dollar. The net-long was cut by 35% to 21,979 lots.
Reductions of both long and short positions also continued in fixed income and equities. Substantial short-covering in the C’boe VIX contract reduced the net-short to just 18,708 lots, the least short in 14 months.
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
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