Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Head of Commodity Strategy
Summary: Speculators bought dollars for a second week with JPY and CHF also in demand as the death toll from the coronavirus continued to rise and infections accelerated
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.
Hedge funds and other large speculators bought dollars for a second week as the Coronavirus uncertainty helped trigger renewed demand. Against ten IMM currency futures and the Dollar Index the dollar long rose by $2.2 billion to $6 billion, a four-week high.
The dollar buying was broad based with the exception being a 19% reduction in JPY shorts and a more than doubling of the CHF long to the highest since 2016
Speculators cut short positions in the Cboe VIX future (Ticker: VX) by 19% to 139k lots. Still an elevated and exposed position considering the continued rise in volatility since last Tuesday. Adding to this a return to backwardation which has removed the roll-yield short sellers have benefited from in recent months.