NY Open: US dollar firms on FOMC, Italy and Brexit
Worries that the Fed may not as be as hawkish as hoped is niggling US traders, while in Europe, fears of a no-deal Brexit and a profligate Italian budget proposal continue to weigh on sentiment.
Head of Commodity Strategy
In the week to May 1 speculators bought dollars against every IMM currency futures that we track in this report. As a result of this the gross dollar short was cut by 21% to $19 billion. The main contributors were net selling of EUR, CHF and GBP.
Surprisingly, the gross long in EUR increased by 4067 lots to 100,443 lots so the 8% reduction in the net-long to an 18-week low was purely driven by a strong pick-up in fresh short selling.
In fixed income, leveraged funds extended bearish bets across the US yield curve with all maturities except 10-year notes being sold.
The total value of a one basis point move from 3-months Eurodollar to T-bonds ultra rose to $198 million, the highest in at least a year. This not least due to heavy selling at the front end of the curve where the net-short in 5-yr notes reached 780k lots, a 15-month high.
In equities, aggressive buying of the S&P500 flipped the position from a net-short to the highest net-long since 2009. In addition, specs bought Nasdaq and Dow Jones while selling out some more of the VIX long.