Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Head of Commodity Strategy
Summary: The Commitments of Traders reports highlight speculators positions and changes made during the week to June 9 in FX, bonds and stocks. Appetite for risk temporarily received a knock amid worries around a re-acceleration of COVID-19 cases and continued uncertainty around the speed of recovery. Despite general dollar strength speculators accelerated their broad selling with the Greenback short doubling to levels last seen two years ago.
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.
This summary highlights futures positions and changes made by speculators such as hedge funds and CTA’s across forex, bonds and stocks up until last Tuesday, June 16. Appetite for risk temporarily received a knock amid worries around a re-acceleration of COVID-19 cases and continued uncertainty around the speed of the U.S. and the global recovery. The S&P 500 ended the reporting week down 2.4% while the yield on U.S. ten-year notes reversed lower to their established 0.6% to 0.8% range.
Speculators almost doubled bearish bets on the Greenback, this despite seeing the dollar rise by 0.7% against an index of currencies. The combined dollar short against ten IMM currency futures and the Dollar Index jumped by $8.4 billion to $16.8 billion, the highest since May 2018.
The heavy selling was broad-based but with the bulk of the flow mostly benefiting the euro and Australian dollar. The euro net-long reached €14.6 billion, the highest since May 2018 while the Australian dollar’s 28% rally from the March low supported a further cut in the net short to 6.5 lots, also the lowest since May 2018. Despite the risk off theme driving markets during the week, the Mexican peso position managed to flip back to long and a 13-week high.