Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
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COT Reports show hedge funds racing to cash post-Liberation Day
Ole Hansen
Head of Commodity Strategy
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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, 8 April 2025.
- The latest reporting week to 8 April encompasses the bulk of the negative market response to Trump’s ‘Liberation Day’ speech, as traders and investors tried to absorb the blow of Trump's far larger-than-expected tariffs.
- Speculators turned aggressive net sellers of the greenback, offloading USD 5.3 billion across major currency futures, led by demand for EUR, JPY, and CHF.
- Deleveraging forces were on clear display across commodities, leading to a 37% reduction in the net long held across 27 major contracts to a seven-month low, with selling particularly strong in crude oil, gold, silver, copper, and coffee.
Forex:
In the wake of former President Donald Trump’s bombshell "Liberation Day" speech on April 3—during which he unveiled sweeping reciprocal tariffs on all major U.S. trading partners—global markets were thrust into turmoil, and the forex market responded swiftly. The reporting week to April 8 captures the brunt of this initial chaos, marked by a sharp retreat in the U.S. dollar as investors rushed to reposition amid fears of an all-out global trade war causing a global economic slowdown and a recession in the U.S. Speculators turned aggressive net sellers of the greenback, offloading USD 5.3 billion across major currency futures tracked by the CFTC, flipping the aggregate net position against eight IMM-tracked currencies from a modest USD 0.9 billion long to a USD 4.4 billion short—the largest bearish positioning on the dollar in six months. The U.S. Dollar Index (DXY) fell by 1.3% during the period, led by sharp gains in the euro, Japanese yen, and Swiss franc— the latter two currencies often favored during times of uncertainty. In JPY, the net long positioning jumped to an all-time high of 147,000 contracts (USD 12.7 billion equivalent), while speculators added USD 1.1 billion in euro longs and a notable USD 1.9 billion in Swiss franc longs.
Commodities:
In commodities, the latest reporting week to 8 April encompasses the bulk of the negative market response to Trump’s "Liberation Day" speech, which triggered a market meltdown as traders and investors tried to absorb the blow of Trump's far larger-than-expected tariffs on all its major counterparts, sparking threats of retaliation and a broad sell-off around the world on concerns that a global trade war on this scale and magnitude will drive an economic slowdown—not least in the US, where inflation forecasts have spiked and sentiment among consumers and businesses has fallen sharply during the past couple of months. An across-market slump triggered a major round of dash-for-cash as leveraged traders such as hedge funds were forced to reduce exposure as volatility spiked and, in some cases, to realise cash to meet increased margins and to meet losses. During the latest reporting week, these forces were on clear display across the commodities sector, leading to a reduction in both short and especially long positions, and an overall 37% reduction in the net long held across 27 major contracts to a seven-month low. The bulk of the pain was inflicted on the pro-cyclical energy sector, with crude oil taking a double hit from recession fears hurting demand and a surprise production increase from OPEC+. The crude oil net long tumbled 192k contracts to a four-month low, the bulk of which was a record 162.3k contract reduction in Brent. In metals, the gold long was reduced by 22% to a 13-month low at 138k contracts, with no "safe havens" being safe during a period of deleveraging; however, while gold only fell 5% during the reporting week, silver suffered a 13.5% slump and a 47% reduction in the net long to a four-month low at 22k contracts. Aggressive selling of platinum saw the net flip to a net short and the biggest bet on falling prices in 13 months, while copper saw a 55% reduction as the tariff-related premium over London deflated. The agriculture sector was mixed, with selling of soybeans, coffee, and cattle being partly offset by demand for wheat and especially corn, two key crop contracts both benefiting from robust export demand as the dollar weakens.
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:
11 April 2025: Commodities weekly As chaos reigns whats next for markets
8 April 2025: Golds deleveraging pullback fails to shake supportive outlook
8 April 2025: Golds deleveraging pullback fails to shake supportive outlook
7 April 2025: COT on Forex and Commodities - April 7 2025
4 April 2025: Commodities weekly Tariff-led recession pain triggers sharp reversal
3 April 2025: Tariff-related recession fears ignite widespread commodities selloff
2 April 2025: Commodity Outlook: Commodities rally despite global uncertainty
31 Mch 2025: COT Report: Ongoing USD selling amid mixed week for commodities
26 Mch 2025: Commodities show strength in Q1, led by a select few
25 Mch 2025: Crude oil Sanctions threat counters tariff-driven demand worries
24 Mch 2025: COT on Forex and Commodities - 24 March 2025
21 Mch 2025: Commodities weekly: High-flying precious metal sees profit taking
19 Mch 2025: Has the gold express already left the station?
17 Mch 2025: COT Report: Silver and copper stands out in week of energy weakness
14 Mch 2025: Gold surges past USD 3,000 as haven demand grows
12 Mch 2025: Tariffs and the energy transition: Key drivers of copper demand
11 Mch 2025: Gold holds steady despite deleveraging risks in volatile markets
10 Mch 2025: COT Report: Wholesale reductions in speculators' USD and commodity longs
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
Podcasts that include commodities focus:
11 April 2025: US and China are slipping into an economic war
4 April 2025: Markets melts down as recession risks go global
1 April 2025: Bracing for Liberation Day
25 Mch 2025: Did Trump just blink?
18 Mch 2025: US market found support, but how durable will it be?
14 Mch 2025: Is silver set to shoot the lights out?
10 Mch 2025: US un-exceptionalism is the theme
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
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