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Foreign Exchange

IMM: investors trim EUR shorts ahead of ECB meeting; AUD back in long territory

Speculators on the CME cut their short positions in the EUR ahead of last week’s European Central Bank (ECB) policy meeting.

The shift was most likely a result of the perceived progress made at the summit of EU leaders to address the eurozone debt crisis, which drove a wave of EUR buying as investors took profit on the short positions in the single currency. The latest Commitment of Traders report, issued by the Commodity Futures Trading Commission, shows investors net bought 18,000 EUR contracts in the week to July 3. That reduced the value of bets against the single currency by $1.9 billion to $23 billion.

 IMM - short EUR positions trimmed

 
 Source: Scotiabank, IHS, CFTC

Still, EUR remains by far the most shorted currency on the CME, and events since July 3 suggest speculators will have added to their bets against the single currency.

Short positioning in the EUR was likely to have been driven back towards the record levels it June, as the ECB delivered a surprise cut in its deposit rate to 0% at its policy meeting.

Although, the reaction of short-term speculators on the CME will not be made public until next week, flow data from other sources – and price action in the spot market – suggest it provoked another wave of EUR selling.

The other notable move in positioning on the CME was in AUD, which reclaimed its place as the currency in which the largest net long position is held against the USD.

A $1.2 billion rise in the value of net long AUD positions was driven by an increase in gross long positions and short covering. That took the AUD position into net long territory – at $961 million – for the first time since mid May.


 IMM - investors return to long AUD positions

 
 Source: Scotiabank, IHS, CFTC
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