Speculative Investors Cover GBP Shorts, Add Safe-Havens Data in this report cover the period through Tuesday Jun 14 (ahead of Wednesday’s FOMC and Thursday’s shift in market sentiment) & were released Friday June 17.
• The latest snapshot of investor sentiment provided by the CFTC Report shows speculative investors and CTA-type accounts aggressively reducing net short GBP exposure even as uncertainty surrounding the UK EU referendum increased. Net GBP short positions were cut by nearly half in the latest week’s data (driven mainly by increases in gross GBP long positions). Interestingly, the positioning switch occurred ahead of the heightened volatility in the GBP that developed through the latter part of the past week. In aggregate, overall positioning changes drove a significant USD7.5bn drop in the overall USD long position.
• Elsewhere, however, investor behavior suggests defensive positions are being accumulated aggressively as significant event risk looms. Net longs in both the JPY and CHF increased this week (while investors added significantly—by around USD7.5bn—to net long gold positions). Heightened speculative positioning in the JPY will add to official anxiety in Tokyo with regard to JPY valuation.
• Investors trimmed net short EUR positions modestly (suggesting no indulgence of the idea that the EUR offers a proxy hedge against EU referendum volatility). Modest changes were registered in the other risk currencies (MXN, AUD and NZD). Net CAD longs were reduced by around 3k contracts (USD259mn equivalent) as CAD slippage chips away at bullish sentiment.