Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Head of Commodity Strategy
Summary: The COT reports highlight speculators positions and changes made during the week to April 28 in FX, bonds and stocks. The risk on seen during this period was driven by hopes, in some cases premature, that the COVID-19 pandemic had started to loosen its stranglehold on the global economy. The S&P 500 jumped by 5% while the dollar despite trading softer was bought for the first time in nine weeks
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.
A mixed week in forex saw speculators turn net buyers of dollars for the first time in nine weeks. The Greenback short against ten IMM currency futures and the Dollar index was cut by $1 billion to $8 billion. The haven currencies of yen and Swiss franc as well as the Mexican peso were all bought, the latter following more than three months of non-stop selling. These developments, however were more than off-set by selling of Sterling, Canadian and Australian Dollar and not least the euro where speculators had been adding length for the past eight weeks.
The speculative short position in the C'Boe VIX futures was cut by 41% to 19k lots, an almost 15 month low. The reduction occurred despite a 4.6% rally in the S&P 500 Index driving a 12% drop in volatility. Interestingly the reduction was almost entirely driven by short positions being closed, potentially a sign of fading optimism that the stock market rally can continue.