In our last take on the British pound in early January, we wrote that the currency was set to keep strengthening thanks to strong regional growth, moderate sentiment and the historically low value of the pound. More specifically, the currency looks cheap based on broad nominal effective exchange rates (a measure of the pound relative to other foreign currencies). Looking at GBP/USD since our last…

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Japan has suffered from weak growth and inflation since the global financial crisis, and the Bank of Japan has frequently experimented with unorthodox monetary policies. In September 2016, the BoJ decided to directly target long-term interest rates. The so-called “yield curve control” (YCC) program fixed 10-year Japanese government bond (JGB) yields at 0%. If yields deviated from the BoJ’s target…

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Tags: Japanese yen

Looking at this week’s Commitments of Traders Report, bullish extremes continue in long crude oil, the euro and the British pound. Net long positions have also grown this week for the two currencies and the commodity. The purpose of this report is to track how the consensus is positioned across various currencies and commodities. When net long positions become crowded in either direction, we fla…

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Tags: US dollar

Looking at the latest Commitments of Traders report, bullish extremes continue in long crude oil, long British pound and long euro speculator net positions. While long crude oil and British pound positions have grown, long euro positions have fallen this week. The purpose of this report is to track how the consensus is positioned across various currencies and commodities. When net long positions…

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Tags: Crude oil

Looking at this week’s COT report, the British pound is now at a bullish extreme, while the Australian dollar is no longer at a bearish extreme. Bullish extremes continue in long euro and long crude oil speculator net positions. The purpose of this report is to track how the consensus is positioned across various currencies and commodities. When net long positions become crowded in either direct…

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Looking at the latest COT report, there are new extremes in short Australian dollars and long euro positions. Long crude oil net positions continue to look fairly crowded. The US dollar remains out of favor, but positioning is not yet at a bearish extreme. Notable e…

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After a great performance in 2017, the good times for the British pound look set to continue. While manufacturing and construction PMIs announced earlier this week missed expectations, services PMIs beat optimistic expectations. Given the forward-looking nature of PMI surveys, upcoming GDP growth should remain strong. As services dominate the UK’s exports, this news was well-received in foreign e…

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After President Trump unveiled his tax plans, many had predicted that the US dollar would strengthen thanks to the inflationary impact of reducing taxes by $1.5T. According to academic theory, an economy with limited slack and high growth is at the risk of overheating if fiscal stimulus is excessive. This is especially true as crude oil (a significant driver of inflation), continues to make multi…

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Tags: US dollar

In this week’s COT report, most major currencies and commodities remain outside of bullish or bearish extremes. Instead, the only position that looks extreme is long crude oil. Over the past week, speculators have added to their long crude positions, and there are now 679,047 futures and options contracts long the commodity. Given the size of the long crude crowd, even a small pullback in crude o…

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Tags: Crude oil

Based on the US dollar index, the US dollar fell by 10% in 2017, its worst performance since 2003. Against the euro, the currency fared even worse and fell by more than 12%. Given the mean-reverting nature of currencies, one would assume that the dollar would at least enjoy a relief rally at the outset of 2018. Following today’s Markit Eurozone manufacturing PMI numbers, it looks like the dollar …

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Tags: Euro, EUR/USD