The euro currency remains the top bet (compared to the British pound, US dollar) among forex traders according to the latest report from leading foreign exchaneg institution Deutsche Bank.
Just at it looked as if the Dollar was turning a corner, USD bulls have once again be derailed.
This time it would appear to have been driven by the jobs “disappointment” on Friday.
With all major employment indicators doing worse than forecast, investors will be concerned that with inflation so low the data needs to be exceptional to warrant some more moves from the Fed this year.
The jobs report may have looked considerably worse because of the revised Q2 GDP figure (3%), which potentially boosted expectations that employment would be stellar.
Despite the misses across the board, the data showed broadly that the jobs market in the US continues to remain steady.
There was nothing particularly concerning (perhaps outside of persistently stagnant wage growth) but to make a more dramatic comeback out of the bleak sentiment it currently wallows in, the Dollar may need outperformance now.
Dollar futures positioning is short and getting shorter
Positioning has been very short in the Dollar for some time now, while Euro’s have been being extended matching the move in EUR/USD.
Economists at Deutsche Bank released a report on Tuesday which displayed how despite the Dollar’s recent signs of life, the short positioning is not far off the largest that has been seen for a decade.
While major partner the GBP is also suffering from heavy selling, Euro positioning continues to grind higher,
“Traders in Financial Futures data show that both communities continued to be heavily bearish on the implied dollar positioning. Leveraged funds extended their short exposure in the implied dollar by a tenth, whereas asset managers increased short exposure moderately over the week to be the largest shorts since 2010. In EUR, leveraged funds extended their longs by one-third, while adding to GBP shorts by 15%. Asset managers marginally added to EUR longs and GBP shorts.”
Risk-off has been harming the USD recently, perhaps led down by USD/JPY or the US’s heavy involvement in the North Korean saga, the typically haven Dollar is not being preferred over the Euro. Heading into this week’s ECB meeting fears do not seem to have grown that the central bank could try to do some damage, leaving the potential for a dovish Draghi assault very much still on the cards when you see the extended positioning he has to play with.