Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Head of Commodity Strategy
Summary: Speculators bought dollars in the week to September 3 when the market hit peak pessimism on trade and growth. Buying most noticeable against EUR, JPY and CAD
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
In the week to September 3 the non-commercial dollar long against ten IMM currency futures rose by 26% to $13.1 billion, a five-week high. This was the day when peak pessimism on trade and growth helped send the dollar to a 28-month high against the euro before reversing course the following day.
The bulk of the dollar buying was against the euro where the break below €1.10 helped drive a 10,332 lots rise in the net-short. The stronger dollar also helped reduce the JPY net-long from a near three-year high to 27,682 lots. Bearish Sterling bets were reduced for a fourth week to 84,959 lots but the Brexit troubled currency remains the most favored short by speculators.