Following the Fed meeting on 18 December, at which the US central bank announced the start of QE tapering, speculators added longs in EUR against USD. This underlines that the Fed move was largely priced as indeed the subdued market reaction suggested. Since then 2Y swap rates have moved in favour of a lower EUR/USD. Year-end EUR liquidity issues should, however, start to ease and pave the way for downside in the cross in our view.
In fact, the main move following the Fed announcement was for non-commercials to short JPY further. We emphasise, however, that Japanese data have turned somewhat more favourable lately, which - together with the extremely short positioning - adds to the risk to our call for continued JPY weakness that Bank of Japan may not be as aggressive on easing as we currently project in order to counter the effects of the sales-tax hike due later this year.
Speculators headed into New Year with a close-to-record level of longs in crude oil, underlining that if we are right in projecting a less tight oil-market balance, oil prices could be in for a sustained move lower. We also stress that while investors are now betting on higher copper prices on average, we think there is a risk that metals will have a harder time this year as China slows again.
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IMM Positioning: JPY Most Sensitive To Fed Tapering Announcement
Published 01/02/2014, 05:44 AM
Updated 05/14/2017, 06:45 AM
IMM Positioning: JPY Most Sensitive To Fed Tapering Announcement
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