The Shortened Week Saw Smaller Speculative Position Changes

The CFTC Commitment of Traders reporting week ending February 16 was short due to the US holiday.  This may have contributed to the small adjustments to speculative positioning in the currency futures.  It also may reflect the lack of conviction that a dollar recovery was at hand. 

Understanding Currency Correlations

Those looking to trade in any of the financial markets will obviously need to have a firm understanding of the basics involved in their chosen asset class.  However, what is likely less obvious is the fact that traders in one asset class should at least spend some time monitoring what is happening to price changes in peripheral markets. 

Not Cuckoo for CoCo Bonds

John Cryan, the chief executive of Deutsche Bank, has described his bank as “rock solid”. This may be what you would expect to hear from the executive with his hand on the tiller – but it is a bit like a politician talking enthusiastically about their high moral standards. In other words, it can be cause for concern.

CFTC: Position Reductions Pick Up the Pace

There are two broad developments in speculative positioning in the Commitment of Traders report in the week ending February 9.  First, the market turbulence saw speculators reduce exposure.  Of the 16 gross positions we track, 11 were reducing positions by liquidating longs or covering shorts.

Second, there was an unusual amount of significant gross position adjustments, by which we mean a change of 10k contracts of more in a gross position. There were six such adjustments, and they were equally divided between increasing and reducing exposures. 

Euro and Yen Rise Even Though Rates are Negative

The conundrum that everyone is wrestling with is the euro and yen's strength given their negative interest rates and prospect for even lower interest rates.  The divergence of monetary policy, even if the Fed is on hold for the rest of this year and next, should be dollar-positive. 

Euro Gains despite QE Programs

When we look at many of the financial media headlines over the last year, we have seen a good deal of attention focusing on the declining valuation in the Euro.  However, when we take a closer at specific valuations in the Euro, we can see that this is not necessarily the case. 

A Moderating Europe and U.S. no Comfort for Asia

After a meltdown in Asia, the global capital markets are stabilizing in Europe.   The US S&P managed to recoup about half of its losses before the close yesterday, but this gave not comfort to Japanese investors.  The yen's strength and ongoing concerns about banks' exposure to energy companies took the down 5.4% and pushed the 10-year JGB yield into negative territory for the first time. 

Investors Wait for the Next Renminbi Shoe to Drop

In the first quarter of 2014, the People’s Bank of China (PBoC) finally succeeded in breaking persistent renminbi (RMB) appreciation expectations. Unfortunately, the subsequent RMB depreciation coincided with the weakening of China’s economic fundamentals. As a result, instead of creating two-way fluctuations in the RMB exchange rate, expectations of RMB depreciation started to creep into the market. Capital outflows driven by expectations of RMB depreciation started to rise.

Despite Big News, Futures Speculators Limited Big Moves

The latest Commitment of Traders report covers the week ending February 2 that included the FOMC meeting and the BOJ's surprise cut.  There was also speculation of a potential deal between Russia and OPEC to cut output.  Speculative position adjustment in the futures market was more limited than one might have expected. 

The Dollar on its Heals, at Least for a Week

The US dollar traded higher before the weekend with the help a fairly robust jobs report.  Although the jobs growth itself was somewhat disappointing, the details were constructive:  More people working a longer workweek and earning more.  The participation rate rose, and the unemployment rate (U-3) fell.  The Atlanta Fed GDPNow tracker increased to 2.2% in Q1 16 from 1.2% at the start of the week.