Investors remain very short EUR:
The EUR rallied as the market was relieved that Greece was able to secure a second bailout package, thereby avoiding a disorderly outcome. Euro net positioning remains very short even as some unwinding of short positions took place as progress on the Greece PSI was made. The recent EUR rally is likely to have washed out some of the EUR shorts, though non-commercial investors are likely still short the single currency.
Continued reduction in net long JPY positions: The JPY continued to depreciate sharply last week, causing a significant reduction in net short positions from 19 to less than 12 percent of open interest. The yen also continued to weaken last week, on the back of the BoJ’s announcement to apply further QE. JPY net-long positioning is now within one standard deviation of the long-run mean. This indicates that positioning is close to neutral levels and that the potential for positioning unwinding to drive a further move higher in USD/JPY is likely to be limited.
Reduction in GBP shorts: During the week covered by the data, non-commercial investors reduced their short GBP positions to 17 percent of open interest, potentially reflecting that the immediate risk of a Greek default, with a negative spill-over to GBP, has decreased. Furthermore, while the BoE ramped up its QE programme at the February meeting, the BoE inflation report released on February 16 did not lead to marketparticipants scaling up their expectations for further QE.
