Shorts, paring back – Rabobank

USD net long positions increased for the second week in a row. Net long positions in the euro increased for the third week in a row. GBP net longs increased for third consecutive week, JPY net longs increased for third consecutive week, Rabobank FX analysts note.

USD net longs rise

USD net long positions increased for the second week in a row as short positions fell. Stronger-than-expected secondary estimates for US Q2 personal consumption (2.9% vs. 2.2%) and GDP (2.0% vs. 2.8%) on Aug. 29 led to an increase of 4.75 bp over the 10 years. Traders are pricing in a 32bp discount to the September Fed meeting at the time of writing.

Net euro longs rose for the third week in a row as short positions fell. Core CPI inflation in the euro area came in line with expectations at 0.0% m/m and 2.8% y/y, while the unemployment rate for July came in at 6.4% versus estimates of 6.5 %. The OIS price implies a 25bp cut at the September 12 ECB meeting.

Net long positions in GBP increased for the third consecutive week, driven by a decrease in short positions. GBP remains the best performing G10 currency against the USD year to date with a return of 4.09%. JPY net longs increased for the third consecutive week, driven by a decline in short positions. JPY longs are at their highest level since February 2021 and USD/JPY is trading near annual lows at 142.