Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Access both platforms from your single Saxo account.
COT: Hawkish Fed drives selling of energy and metals
Ole Hansen
Head of Commodity Strategy
Summary: Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to August 30. A week that covered the markets overall negative response to the hawkish message from Federal Reserve Chairman Powell at Jackson Hole. Growth and interest rate sensitive commodities were sold while key agriculture commodities, supported by tightening fundamentals attracted continued buying.
Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to August 30. A week that saw financial markets and commodities respond mostly negatively to renewed growth concerns after the Federal Reserve Chairman, Jerome Powell, left the market in no doubt that the US and other major central banks would continue to hike rates and keep them high for a prolonged period in order to combat runaway inflation. This development helped to drive stock markets sharply lower, while the dollar reached multi-year highs and bond yields climbed back towards the June high.
Commodities
The Bloomberg Commodity index traded lower by around 1% during the reporting week as losses in energy, precious and industrial metals were only partly offset by gains in grains and soft commodities. Hedge funds reacted to these developments by cutting length in growth and interest rate sensitive commodities from natural gas to gold, copper and livestock while buying was concentrated in corn, sugar, cocoa and coffee. Energy: Crude oil was mixed with net selling of WTI being more than offset by demand for Brent where fresh buying was seen after the price approached support in the low-90 dollar per barrel area. Across the product market positions were adjusted according to the latest developments that had seen slowing demand for gasoline while the gas-to-fuel switch supported demand for diesel contracts, both the ULSD (Heating oil) contract traded in New York and the London traded GasOil contract.
Metals: Precious metals saw continued selling with speculators cutting their gold net long by 32% to 20.7k lots while increasing net short positions in silver, platinum and copper.
Agriculture: Funds added length in grains for a fifth week, led by corn after the US ProFarmer Tour reduced the crop outlook. The soybean complex was mixed while length was added to Kansas wheat and the CBOT short was reduced. The soft sector saw net buying of all four contracts fresh longs being added to sugar, coffee and cotton while the cocoa net short was reduced.
Forex
The forex market responded very muted to dollar strength that followed the Jackson Hole speech by Federal Reserve Chairman, Jerome Powell. Overall the gross dollar long against nine IMM forex futures and the dollar index rose by 3% to $18.5 billion, with selling of euro, sterling and yen being partly offset by demand for CAD, AUD and MXN. The short position held in IMM Euro contracts reached 47.7k contracts or nearly €6 billion, the biggest bet on a weaker euro since March 2020.
What is the Commitments of Traders report?
The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.
Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)
The reasons why we focus primarily on the behavior of the highlighted groups are:
- They are likely to have tight stops and no underlying exposure that is being hedged
- This makes them most reactive to changes in fundamental or technical price developments
- It provides views about major trends but also helps to decipher when a reversal is looming
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)