JPY, turning over a new leaf – Rabobank

Net long US dollar (USD) positions decreased. Net long positions in euro (EUR) increased, driven by a decrease in short positions. Net longs in sterling (GBP) moved higher again after the recent shakeout, and net longs in Japanese yen (JPY) increased, note Rabobank FX strategists Jane Foley and Molly Schwartz.

Forex market positioning on August 20

“USD net long positions decreased, driven by an increase in short positions. Better US economic data ensured the market priced in too much easing from the Fed during its mini-panic earlier this month. That said, Powell struck a slightly more dovish tone than expected at the Jackson Hole event, sending the USD lower on Friday. Net euro long positions increased, driven by a decrease in short positions. July CPI inflation in the Eurozone was in line with expectations at 0.0% m/m and 2.6% y/y. We have seen consistent appreciation in the EUR against the USD, with EUR/USD rising from an August low of 1.0778 to 1.1189 at the time of writing.”

“Net long positions in GBP have moved higher again after the recent shakeout. GBP is the best performing G10 currency against the USD. At the time of writing, the market is pricing in a 26.7% probability of a 25bp cut at the September BoE meeting. JPY net long positions increased, driven by an increase in long positions. JPY net short positions are at their lowest level since March 2021. This continues the uptrend that has been in place since early July. The Bank of Japan released its decision to raise its target rate by 15bps to 0.25% on July 31. Since then, Japanese economic data has mostly improved and JPY long positions are at their highest level since 2016.”