US dollar bullish bets fall despite strong jobs report

August 15, 2016

The market is betting for "USD Bearish" according to the CFTC Sentiment.

US dollar bullish bets fall despite strong jobs report

This article is originally referred from IFC Markets Market Sentiment

US dollar bullish bets fell to $11.13 billion from $12.79 billion against the major currencies during the previous week, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to July August 9. The long bets on dollar fell despite a surprisingly strong July jobs report.

The US economy added 255000 new jobs instead of expected 180000 and both the hourly earnings and weekly hours rose together with labor force participation rate, indicating further tightening in strong labor market. However, wholesale inventories rose, the decline in factory orders accelerated in June, and business activity and employment expanded at a slower pace in services sector as ISM Services PMI declined to 55.5 in July from 56.5 in June.

The external trade deficit rose in June as growth in imports exceeded higher exports and labor productivity fell in second quarter. Falling bullish bets on dollar indicate investors deem the likelihood of an interest rate hike this year has diminished after disappointing second quarter GDP data despite improving labor market. As is evident from the Sentiment table, sentiment deteriorated for British Pound and Canadian dollar. And the euro and the British Pound are the two major currencies held net short against the US dollar.

The bearish euro sentiment improved as the net short position in euro fell at roughly the previous week’s pace by $0.9bn to $13.6bn. The net short position in euro narrowed as investors cut the gross longs by 4074 contracts and covered the shorts by 9778 contracts respectively. The British Pound sentiment deteriorated as the Bank of England cut the interest rate to 0.25% from 0.5%, increased asset purchases program to 435 billion Pounds from 375 billion and indicated further easing bias.

The Pound net short rose by $0.4bn to $7.3bn. The net short position in British Pound increased as investors built the gross longs by 2148 contracts while the shorts were increased by 9715. The bullish Japanese yen sentiment further intensified with the net long position in Japanese yen rising by $0.8bn to $5.9 bn. Investors increased both the gross longs and gross shorts by 10144 and 3013 contracts respectively.

The sentiment deteriorated for the Canadian dollar with the net longs declining by $0.18bn to $1.17bn. Investors increased both the gross shorts and gross longs. The bullish sentiment intensified for the Australian dollar with net longs rising by $289 million to $2.67 billion. Investors continued to build the gross longs and cover the shorts. The sentiment improved significantly for the Swiss franc with the $222 million net short position turning into a $14 million net long. Investors reduced both the gross longs and the shorts.

cftc sentiment exchange rate long short positiond

cftc weekly net long short position ration

Original Source: IFC Markets Market Sentiment

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