IMM positioning data released on Friday revealed short-covering in the currencies with the largest notional outstanding in the report, namely EUR, JPY and GBP. This has consequently reduced the aggregate bullish USD bets . Importantly, however, non-commercial positioning in the greenback remains at historically stretched levels just below 99th percentile. While this suggests a high sensitivity to USD downside risk we still expect USD to strengthen in the coming 6M primarily driven by a re-pricing of Fed, as we still find Fed pricing in the financial markets as too dovish. We expect the Feds hiking cycle to take-off in June.
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