Article / 08 January 2018 at 8:59 GMT

COT: EUR long surges, curve-flattening trades set tone for bonds

Head of Commodity Strategy / Saxo Bank
Denmark
  • Non-commercial dollar short against eight IMM currency futures jumps
  • Bond market sees continued addition of curve-flattening trades
  • IMM EUR net-long rises 39% to fresh record of 128,000 lots

EUR
The euro net-long surged in the week to January 2. Photo: Shutterstock

By Ole Hansen

The non-commercial dollar short against eight IMM currency futures jumped to $4.2 billion in the week to January 2 with the main action a 39% surge in the euro net-long to a fresh record. The AUD net-short was close to a two-year high while GBP was the second most-favoured currency. 

Curve-flattening trades continued to be added in the bond market. 

IMM currency futures:
Speculative IMM currency positioning
   
The main action was seen in IMM EUR where surging demand took the net-long higher by 39% to a fresh record of 128,000 lots or €16 billion.

Speculative positioning in IMM EUR
 
Other currencies were mixed with the most noticeable change being the continued selling of IMM AUD where the net-short rose by 47% to 20,000 lots, nearing a two-year high.

GBP has climbed to become the second most-favoured currency followed by CAD and MXN. All other currencies are net-short against the dollar, not least the JPY.

Financials

In fixed income, more flattening trades were seen with two- and five-years being sold while 10s and ultra 10s were bought. The overall futures net-short exposure betting on higher yields remained closed to unchanged with the basis point value falling by $3.3 million to $152.4m.

Speculative buying of equities saw all four major indices in demand, not least the S&P 500 where the net-short was halved.

Despite rallying stocks and falling volatility, VIX futures saw some modest net buying primarily due to new longs being initiated.

Speculative positioning in Financials
 

— Edited by Michael McKenna

Ole Hansen is head of commodity strategy at Saxo Bank

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COT in week to Jan 2: IMM Currency futures

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COT in week to Jan 2: Financials covering bond and stock index futures

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