Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
COT report: Wholesale reductions in speculators' USD and commodity longs
Ole Hansen
Head of Commodity Strategy
Key points:
- Our weekly Commitment of Traders update highlights futures positions and changes made by hedge funds across forex and commodities during the week ending Tuesday, 4 March, 2025.
- Speculators sold USD for a seventh consecutive week, reducing the dollar long versus eight IMM futures by 72% from the mid-January peak.
- Accelerated selling was seen across all commodities sectors, led by agriculture, on heightened tariff focus.
- The grains sector witnessed the biggest one-week reduction in two years on China's countermeasures.
- WTI long rises from a 15-year low on short covering, while Brent longs see the biggest cut since July
- Gold and copper net selling driven by a combination of long liquidation and fresh short selling.
Forex:
In the forex market, speculators sold USD for a seventh consecutive week, reducing the dollar long versus eight IMM futures by 37% to USD 9.6 billion, the lowest since October, and down 72% from the mid-January peak that was reached just ahead of Trump's combatant inauguration speech, which set the tone for the new US administration. Buyers concentrated their focus on three major currencies, led by the JPY, which saw the net long jump 39% to a fresh record high at 134k contracts, or USD 11.3 billion equivalent. The technical breakout in EURUSD helped reduce the net short by 60% to 10k contracts (USD 2.1 billion), while the GBP long reached 18.6k contracts (USD 1.1 billion). Partly offsetting these were small amounts of net selling of CAD, AUD, NZD, and MXN.
Commodities:
A second week of broad and accelerated risk aversion and rising volatility saw all sectors and most contracts covered in this update being exposed to net selling. This occurred during a reporting week that, despite a weaker dollar, saw the Bloomberg Commodities Index drop 1.4% as hedge funds lowered their overall exposure amid rising volatility and after Trump's on-again, off-again tariff strategy caused a great deal of confusion and, in some sectors, demand concerns. Not least the agriculture sector, where China's counter tariff move helped trigger the biggest one-week selling of key crops in two years.
Overall, the combined net long across the 27 major futures contracts tracked in this update was cut by 410k contracts to 1.07 million, the lowest since December, with all sectors seeing net selling led by the agriculture sector (333k contracts), with the bulk of the reduction seen across the soy and grains sector.
On an individual level, only WTI and natural gas saw notable buying, with buyers covering short positions in the US crude contract following a slump to a 15-year low in the previous week, while natural gas continues to benefit from rising demand, both domestically in the US and towards exports via LNG. As mentioned, selling was broad, and apart from the agriculture sector being led by Brent after hedge funds cut bullish bets by the most since July as prices temporarily dropped to levels last seen in 2021. The gasoil (diesel) contract flipped to a net short while gold and copper both witnessed net selling despite continued price strength, potentially signalling lower risk appetite in response to rising volatility.
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 main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's 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
Do note that this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy often sees this group of traders buy into strength and sell into weakness, meaning that they are often found holding the biggest long near the peak of a cycle or the biggest short position ahead of a through in the market.
Recent commodity articles:
7 Mch 2025: Commodities Weekly: Tariffs, trade tensions, fiscal bazooka, and Ukraine
5 Mch 2025: Tariff threat disconnects HG copper from global market
4 Mch 2025: Stagflation and geopolitical tensions fuel renewed demand for gold
3 Mch 2025: COT Report: Broad retreat sees WTI longs slump to 15-year low
28 Feb 2025: Commodities weekly: Broad weakness as tariff fatigue sets in
24 Feb 2025: COT Report: traders turn selective despite ongoing broad rally
21 Feb 2025: Commodities weekly: energy market strength and Trump rethoric fuel surge
18 Feb 2025: COT report: crude, gold and grains see mild profit taking
5 Feb 2025: Broad Strength Drives Commodities sector to 26-month High
4 Feb 2025: Crude Oil Wipes Out 2025 Gains as Tariffs and Demand Weighs
3 Feb 2025: COT Report: Mixed Week Seen Ahead of Trump's Tariff Offensive
1 Feb 2025: YouTube: Joining Kevin Muir on The Market Huddle podcast
31 Jan 2025: Commodities weekly: Strong January led by precious metals
29 Jan 2025: Agriculture sector rally led by coffee, corn and cattle
27 Jan 2025: COT Report: Commodity buying extends to fourth week
24 Jan 2025: Commodities weekly: Trump tariff threats and energy agenda in focus
23 Jan 2025: Crude oil weakens amid tariff uncertainty
22 Jan 2025: Gold and silver see fresh gains as Trump 2.0 era begins
20 Jan 2025: COT Report: Elevated commodities longs face short-term risks
17 Jan 2025: Commodities weekly: Strong January rally pauses ahead of Trump
15 Jan 2025: Q1 2025 Commodity outlook: A bumpy road ahead calls for diversification
14 Jan 2025: COT Report: Hedge fund long jumps to 17-month high led by crude, gas and metals
13 Jan 2025: Crude oil rally amid winter demand and Russian sanctions
10 Jan 2025: Commodities weekly: Strong start to the year led by energy and metals
7 Jan 2025: COT Report: Managed money's year-end positioning in forex and commodities
Podcasts that include commodities focus:
7 Mch 2025: US bear market risks ratchet higher. EUR train has left the station
4 March 2025: Are we on the verge of a big whoosh?
25 Feb 2025: Meltdown risks are rising. What to watch next
18 Feb 2025: Europe is on fire
5 Feb 2025: Mag 7 risks underappreciated?
3 Feb 2025: If new Trump tariffs stick, markets have only just begun to react
31 Jan 2025: Does the market think Trump is bluffing?
29 Jan 2025: The DeepSeek winners emerge
27 Jan 2025: DeepSeeking missile strikes global markets
24 Jan 2025: Four days in, Trump continues to dominate headlines, but ...
20 Jan 2025: Trump 2.0 swings into action
17 Jan 2025: Brace for Monday, as a new era begins
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