The latest IMM data cover the week from 1 to 8 December 2015.
IMM positioning data released Friday show how investors - on the back of the disappointing ECB meeting - reduced their bearish EUR-exposure for the first time in seven weeks. From a historical perspective the change in positioning does at first sight seem noteworthy. However, relative to the record ECB-induced spike in EUR/USD - the largest single day rise since the financial crisis - the change in positioning was actually fairly modest. Indeed, speculative EUR/USD positioning remains stretched short at the 9th percentile. In our view, this asymmetry supports our non-consensus call of a higher EUR/USD in 2016: while monetary policy is likely to diverge with the Fed increasing rates and the ECB on hold, the impact of this may not be as strong as many believe. Positioning is heavily skewed towards a stronger USD and history suggests that relative rates have less of an impact when this is the case.
Fundamentally we expect EUR/USD to range trade in the short term, before heading higher in 2016. Our call for a rise in EUR/USD is probably our biggest non-consensus view at the moment and we are getting a lot of push-back on this. However, we believe that markets underestimate what higher inflation and a re-acceleration in euro area growth will do for prospects of ECB policy. Next year could very well be the one where the theme turns from further ECB easing to talking about an exit when we get through the year. Unemployment continues to decline in the euro area and as the structural unemployment rate has increased over the past years, there is probably not as much slack in the euro area as many market participants believe. At the same time, our medium-term valuation models suggest that the euro is heavily undervalued, hence, gravity works towards a stronger euro - not a weaker one. Finally, relative current account flows show EUR buying and USD selling. The bottom line is that we still expect EUR/USD to end 2016 around 1.16 versus the USD.
Speculators noteworthy remain very bearish on commodities in general and wheat in particular. In terms of Brent crude oil bets, non-commercial positioning also remains at historically stretched levels (see margin table).
To Read the Entire Report Please Click on the pdf File Below