Sive Morten
Special Consultant to the FPA
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Fundamentals
This week was logical continuation of the previous one as investors are stepped in in a new week with the same mood and expectations of more data releases. Last week PPI report has set positive tone for the dollar and everybody was wondering whether this signal will be confirmed or not. As data was mostly surprising it has made solid impact on sentiment and markets performance. Indeed, CPI was lower that was not expected after strong PPI, while Retail Sales hit the records overcoming even brave expectations, while Consumer confidence was mostly in a row with expectations. These recent releases start to titillate the fancy of investors around September Fed meeting and again new calls about possible tapering are heard.
Market overview
The dollar climbed to a two-week peak against a basket of currencies on Monday, bolstered by expectations the U.S. Federal Reserve could reduce its asset purchases by the end of the year despite a surge in COVID-19 cases.
Philadelphia Fed President Patrick Harker became the latest official to say he wants the central bank to start tapering this year, saying in a Nikkei interview that he was keen to scale back asset purchases.
Tapering typically lifts the dollar as it means a step toward tighter monetary policy. It also means the Fed will be buying fewer debt assets, which suggests there will be fewer dollars in circulation. The Wall Street Journal reported on Friday that Fed officials will seek an agreement to begin paring bond purchases in November.
Underlying U.S. consumer prices increased at their slowest pace in six months in August, suggesting that inflation had probably peaked, though it could remain high for a while amid persistent supply constraints.
The Labor Department said on Tuesday its Consumer Price Index excluding the volatile food and energy components edged up 0.1% last month. That was the smallest gain since February and followed a 0.3% rise in July. The so-called core CPI increased 4.0% on a year-on-year basis after advancing 4.3% in July. Overall CPI rose 0.3% after gaining 0.5% in July. In the 12 months through August, CPI increased 5.3% after soaring 5.4% year-on-year in July.
The dollar slumped against major currencies on Wednesday after softer-than-expected U.S. inflation data released on Tuesday eased short-term expectations about tapering of asset purchases from the Federal Reserve. But the dollar trimmed losses after positive data showing import prices fell unexpectedly in August and a higher-than-expected reading for the New York Fed's business survey.
Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, edged up 0.1 percentage point to 76.7% in August. Overall capacity use for the industrial sector rose 0.2 percentage point to 76.4%. It is 3.2 percentage points below its 1972-2020 average.
Officials at the Fed tend to look at capacity use measures for signals of how much "slack" remains in the economy — how far growth has room to run before it becomes inflationary.
Inflation appears to have peaked or is close to doing so. A second report from the Labor Department showed import prices dropped 0.3% last month after increasing 0.4% in July. The first decrease since October 2020 lowered the year-on-year increase to 9.0% from 10.3% in July.
A third report from the New York Fed showed its "Empire State" index on current business conditions surged to a reading of 34.3 this month from 18.3 in August. A reading above zero suggests an expansion in regional business activity.
Firms in the region were very optimistic that business conditions would improve over the next six months, with capital and technology spending plans increasing markedly. But supply side challenges remained, with the delivery times measure hitting a record high. While a measure of prices paid for inputs by firms in the regions slipped it remained at very high levels. Manufacturers reported raising prices for their goods, with the survey's gauge of prices received marking its third straight record high.
Wednesday's data showed Britain's inflation rate hit its highest in almost a decade last month after a record jump that was largely fuelled by a rebound in restaurant prices.
The figures, alongside this week's inflation report, will help reduce pressure on the Federal Reserve at its meeting next week, said Robert Cobo Garcia, head of FX strategy at BBVA. Even so, he said, commodity prices and the prices subcomponents of the "Empire" survey suggest inflation pressures driven by rising costs are not over.
Elsewhere, Norway's crown was a touch lower at 8.5965 per dollar, off the more than two-month high of 8.5598 reached overnight amid a rally in oil prices.
The New Zealand dollar was edged up 0.1% to $0.7112, giving up an earlier jump of as much as 0.47% after the economy grew at a much faster pace than expected. The strong gross domestic product data reinforced the view that the central bank will start lifting interest rates despite a recent coronavirus outbreak
The dollar held near three-week highs on Friday after better-than-expected retail sales numbers in the United States boosted bets on the strength of the U.S. economy and earlier monetary policy tightening. U.S. retail sales unexpectedly increased in August, data showed on Thursday, rising 0.7% from the previous month despite expectations of a 0.8% fall. A business sentiment survey also showed a big improvement. The figures revive expectations for an early tapering of its asset purchases by the Federal Reserve, which has its two-day policy meeting next week.
The National Retail Federation said the rise in sales despite the headwinds reflected the continued strength of the American consumer and the resilience of the nation's retailers.
"We maintain our confidence in the historic strength of consumers and fully expect a record year for retail sales and a strong holiday season for retailers," NRF President Matthew Shay said.
Americans are sitting on at least $2.5 trillion in excess savings accumulated during the pandemic. Wages are rising as companies scramble to fill a record 10.9 million job openings.
A separate report from the Labor Department on Thursday showed initial claims for state jobless benefits rose 20,000 to a seasonally adjusted 332,000 for the week ended Sept. 11.
A third report from the Philadelphia Federal Reserve showed its business activity index jumped to a reading of 30.7 in September from 19.4 in August. A reading above zero indicates growth in manufacturing in the region, which covers eastern Pennsylvania, southern New Jersey and Delaware.
On Wednesday, economists at JPMorgan again trimmed their third-quarter GDP growth forecast to a 5.0% annualized rate from a 7.0% pace. The Federal Reserve's "Beige Book" report last week showed "economic growth downshifted slightly to a moderate pace in early July through August."
But after the release of the retail sales report on Thursday, economists at Morgan Stanley raised their third-quarter GDP growth estimate to a 5.0% rate from a 3.3% pace. Goldman Sachs raised its forecast to a 4.5% pace from a 3.5% rate, having lowered it to a 5.25% pace early this month.
Currency markets were generally quiet on Friday with traders reluctant to take on new positions ahead of a clutch of important central bank meetings next week including the Fed, the Bank of Japan and the Bank of England.
The offshore yuan traded at 6.4526 to the dollar, pressured by growing worries about China’s real estate sector as investors fear property giant China Evergrande could default on its coupon payment next week. The Evergrande saga follows a series of regulatory clampdowns in China that has knocked investor confidence in the local stock market, as well as signs growth there is slowing.
Still, on a trade-weighted basis, the yuan stood near its highest level in five years, both in the onshore and offshore market.
The University of Michigan consumer sentiment for September inched higher to 71 versus the final August reading of 70.3, but overall analysts said the rise was nowhere near the improvements seen in the Empire States and Philadelphia Fed manufacturing surveys
Fed meeting on horizon
More than 60% of economists expect the first change in bond purchases to take place in December, according to the latest Reuters poll, which also showed them cutting their forecasts for 2021 economic growth.
That dilemma raises the stakes for the next U.S. employment report, which is due to be released on Oct. 8. That data is likely to show whether the Delta variant of the coronavirus is having a deeper impact than Fed officials anticipated earlier in the summer when they said the economy appeared to be divorcing itself from the pandemic.
The Fed will hold its next policy meeting on Tuesday and Wednesday, a session that will include the release of fresh economic projections and a new read on officials’ interest rate expectations. The projections will incorporate a volatile summer of data that included job gains of nearly 1 million in both June and July before the drop off in August, unexpectedly strong inflation numbers, and a surge of COVID-19 infections and deaths that eclipsed last summer’s viral wave.
The Fed in December said it would not change the bond purchases until there was “substantial further progress” in reclaiming the 10 million jobs that were missing at that point because of the pandemic.
Binding policy closely to the level of pandemic job losses made sense at the time, with the country worried about a new slide into recession and COVID-19 vaccines yet to be widely distributed. It now leaves policymakers dependent on a jobs revival that has run in fits and starts, shaped by forces as disparate as childcare availability or opposition to mask-wearing mandates in large states like Florida and Texas and their effect on hiring and people’s ability to work.
As of August the economy had clawed back fewer than half of those 10 million missing jobs. Other relevant statistics, like the employment-to-population ratio, are short of what policymakers like Richmond Fed President Thomas Barkin, also a voting member of the FOMC this year, have said they want to see before concluding that the job market was repaired enough to begin reducing the bond purchases.
With inflation also higher than expected for most of the last several months, other officials have said the bond purchases should end by early next year. However, a recent weakening of inflation, as expected by many other Fed officials, may temper any sense of urgency to act faster.
That kind of division over policy, in an era when economic data have veered from frightening to ebullient, means the Fed will want to keeps its options open in the weeks ahead, said Tim Duy, chief U.S. economist at SGH Macro Advisors and an economics professor at the University of Oregon.
“They will do something like 2013. Clear the way to taper at any future meeting,” Duy said.
In 2013, the Fed introduced language at its September meeting that began a turn towards eventual reduction of its last round of “quantitative easing” after the financial crisis. At that meeting the Fed noted the economy showed “underlying strength” despite a pullback in federal government spending. But because the impact of that “fiscal retrenchment” remained uncertain, “the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”
It repeated that language at its next meeting, before actually reducing its bond purchases in December 2013. This time it’s the Delta variant that is posing risks.
Many economists contend that attention to the taper discussion is overblown, and that a difference of a month or two in terms of when the Fed begins or ends it makes little difference. But it will send a potent signal that U.S. monetary policy is closing the books on the crisis, and will train focus on the next phase of debate over when inflation will require the Fed to raise its benchmark overnight interest rate - federal funds rate - from the current near-zero level.
It’s a call Fed officials want to get right.
COT Report
EUR shows the same trend in sentiment. Investors close positions in EU currency. Recent report stands for 14th of September and doesn't show yet the big impact of recent Retail Sales data. But, even without it, we see big drop in open interest. The most interesting thing in this report that no changes are come from speculators. They just barely contracted their positions. But the drop has come from hedgers, long-term investors. It's just big run out. Data shows that investors do not care of the sign of recent statistics and other news - they just close their positions. Speculators, by the way also have closed positions with equal amount of longs and shorts. it means that unfortunately we can't count on any sharp reversal of EUR any time soon.
Continued in next post...
This week was logical continuation of the previous one as investors are stepped in in a new week with the same mood and expectations of more data releases. Last week PPI report has set positive tone for the dollar and everybody was wondering whether this signal will be confirmed or not. As data was mostly surprising it has made solid impact on sentiment and markets performance. Indeed, CPI was lower that was not expected after strong PPI, while Retail Sales hit the records overcoming even brave expectations, while Consumer confidence was mostly in a row with expectations. These recent releases start to titillate the fancy of investors around September Fed meeting and again new calls about possible tapering are heard.
Market overview
The dollar climbed to a two-week peak against a basket of currencies on Monday, bolstered by expectations the U.S. Federal Reserve could reduce its asset purchases by the end of the year despite a surge in COVID-19 cases.
Philadelphia Fed President Patrick Harker became the latest official to say he wants the central bank to start tapering this year, saying in a Nikkei interview that he was keen to scale back asset purchases.
"My baseline forecast is still to have inflation around 4% this year, ending this year, and then starting to fall back to 2% over the years 2022 and 2023. However, I do see elevated risk that inflation could run higher," Harker told the Nikkei. I'd like to start the taper process soon, so that we can finish the tapering process, so if we need to increase the policy rate, we have the room to do that. And I think we need to buy ourselves that option."
Tapering talk has boosted the dollar, said Erik Nelson, macro strategist at Wells Fargo Securities in New York. We noticed from the Fed communication that they would like to de-link the taper from the rate hike," Nelson said. "But it will take a lot of convincing and frankly a lot of time for the market to change its reaction function. For now, a taper timeline is closely linked to a rate hike timeline in the market."
Tapering typically lifts the dollar as it means a step toward tighter monetary policy. It also means the Fed will be buying fewer debt assets, which suggests there will be fewer dollars in circulation. The Wall Street Journal reported on Friday that Fed officials will seek an agreement to begin paring bond purchases in November.
"A couple of dynamics favour the dollar," said Rodrigo Catril, senior currency strategist at National Australia Bank in Sydney, noting growing risk aversion as even highly vaccinated countries such as Singapore and Britain log surges in COVID-19 cases. "Re-opening still faces challenges from the consumer, who is cautious and from bottlenecks which restrict ability for the economy to rebound with some gusto," he said. At the same time rising infections suggest we may still need to reintroduce restrictions of some sort. The other thing is that the Fed continues to signal that tapering is coming."
Underlying U.S. consumer prices increased at their slowest pace in six months in August, suggesting that inflation had probably peaked, though it could remain high for a while amid persistent supply constraints.
The Labor Department said on Tuesday its Consumer Price Index excluding the volatile food and energy components edged up 0.1% last month. That was the smallest gain since February and followed a 0.3% rise in July. The so-called core CPI increased 4.0% on a year-on-year basis after advancing 4.3% in July. Overall CPI rose 0.3% after gaining 0.5% in July. In the 12 months through August, CPI increased 5.3% after soaring 5.4% year-on-year in July.
"The CPI has been running less hot than PPI and that's been true for the last five months. When you look at the month over month number, which is the most important number, there is sequential improvement, which is a very good sign. We're clearly seeing inflation heading in the right direction. These numbers are still elevated for historic norms but the sequential trend is still improving and that's a good sign, said Art Hogan from National Securities, NY.
"It’s a fairly positive report in the sense that the Fed's wish that inflation is transitory is coming true. If you look at a lot of the areas that were leading the surge in inflation, now they are all starting to come back down to earth. If you look at some of the components - used cars and trucks (prices), car and truck rentals, airline fares, lodging were all down. It continues to give the Fed maximum flexibility. Our base case expectation is that they are going to discuss (tapering) at the meeting next week but they won't have an official announcement till the November meeting, - Larry Adam from Raymond James, Baltimore.
The dollar slumped against major currencies on Wednesday after softer-than-expected U.S. inflation data released on Tuesday eased short-term expectations about tapering of asset purchases from the Federal Reserve. But the dollar trimmed losses after positive data showing import prices fell unexpectedly in August and a higher-than-expected reading for the New York Fed's business survey.
Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, edged up 0.1 percentage point to 76.7% in August. Overall capacity use for the industrial sector rose 0.2 percentage point to 76.4%. It is 3.2 percentage points below its 1972-2020 average.
Officials at the Fed tend to look at capacity use measures for signals of how much "slack" remains in the economy — how far growth has room to run before it becomes inflationary.
Inflation appears to have peaked or is close to doing so. A second report from the Labor Department showed import prices dropped 0.3% last month after increasing 0.4% in July. The first decrease since October 2020 lowered the year-on-year increase to 9.0% from 10.3% in July.
A third report from the New York Fed showed its "Empire State" index on current business conditions surged to a reading of 34.3 this month from 18.3 in August. A reading above zero suggests an expansion in regional business activity.
Firms in the region were very optimistic that business conditions would improve over the next six months, with capital and technology spending plans increasing markedly. But supply side challenges remained, with the delivery times measure hitting a record high. While a measure of prices paid for inputs by firms in the regions slipped it remained at very high levels. Manufacturers reported raising prices for their goods, with the survey's gauge of prices received marking its third straight record high.
"Businesses and consumers are not out of the woods yet," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania. "Still, we remain comfortable with our forecast for inflationary pressures to moderate further, abstracting from the temporary hurricane effect in September."
"The reality is that there is no guidance other than the obvious: poor economic indicators mean the recovery from the pandemic has slowed down more than expected by Delta," said Juan Perez, FX strategist and trader at Tempus Inc in Washington. The buck in the midst of all this will still have room for gains and spikes as doom and gloom play a role in diminished risk-appetite, but idiosyncratic improvements in the UK as we saw with CPI, and other regions could eventually start weakening the dollar more consistently."
Wednesday's data showed Britain's inflation rate hit its highest in almost a decade last month after a record jump that was largely fuelled by a rebound in restaurant prices.
"We think a combination of modest economic revisions (by the Fed) and steady messaging on the interest rate outlook should be supportive for the U.S. dollar, given that many other central banks are likely to lag the Fed's policy normalization process by a substantial margin," Scotiabank FX analysts wrote in a research note.
The figures, alongside this week's inflation report, will help reduce pressure on the Federal Reserve at its meeting next week, said Robert Cobo Garcia, head of FX strategy at BBVA. Even so, he said, commodity prices and the prices subcomponents of the "Empire" survey suggest inflation pressures driven by rising costs are not over.
"The transmission to final consumer prices will have implications for the Fed’s reaction function even though it may still be too early to see any change in the Fed’s stance in the FOMC meeting next week, especially after the downward surprise in core CPI," Garcia wrote in a note to clients. Overall, domestic news flow and data could give some direction to the USD but ranges against FX majors should persist into the FOMC meeting next week."
Elsewhere, Norway's crown was a touch lower at 8.5965 per dollar, off the more than two-month high of 8.5598 reached overnight amid a rally in oil prices.
"EURNOK is one of the preferred exposures to play a rising crude price, and we're seeing a solid bearish trend here," Chris Weston, head of research at broker Pepperstone in Melbourne, wrote in a note to clients. If Brent and WTI crude are headed for their respective double tops then EURNOK is going one way in my view."
The New Zealand dollar was edged up 0.1% to $0.7112, giving up an earlier jump of as much as 0.47% after the economy grew at a much faster pace than expected. The strong gross domestic product data reinforced the view that the central bank will start lifting interest rates despite a recent coronavirus outbreak
The dollar held near three-week highs on Friday after better-than-expected retail sales numbers in the United States boosted bets on the strength of the U.S. economy and earlier monetary policy tightening. U.S. retail sales unexpectedly increased in August, data showed on Thursday, rising 0.7% from the previous month despite expectations of a 0.8% fall. A business sentiment survey also showed a big improvement. The figures revive expectations for an early tapering of its asset purchases by the Federal Reserve, which has its two-day policy meeting next week.
The National Retail Federation said the rise in sales despite the headwinds reflected the continued strength of the American consumer and the resilience of the nation's retailers.
"We maintain our confidence in the historic strength of consumers and fully expect a record year for retail sales and a strong holiday season for retailers," NRF President Matthew Shay said.
Americans are sitting on at least $2.5 trillion in excess savings accumulated during the pandemic. Wages are rising as companies scramble to fill a record 10.9 million job openings.
A separate report from the Labor Department on Thursday showed initial claims for state jobless benefits rose 20,000 to a seasonally adjusted 332,000 for the week ended Sept. 11.
A third report from the Philadelphia Federal Reserve showed its business activity index jumped to a reading of 30.7 in September from 19.4 in August. A reading above zero indicates growth in manufacturing in the region, which covers eastern Pennsylvania, southern New Jersey and Delaware.
On Wednesday, economists at JPMorgan again trimmed their third-quarter GDP growth forecast to a 5.0% annualized rate from a 7.0% pace. The Federal Reserve's "Beige Book" report last week showed "economic growth downshifted slightly to a moderate pace in early July through August."
But after the release of the retail sales report on Thursday, economists at Morgan Stanley raised their third-quarter GDP growth estimate to a 5.0% rate from a 3.3% pace. Goldman Sachs raised its forecast to a 4.5% pace from a 3.5% rate, having lowered it to a 5.25% pace early this month.
Currency markets were generally quiet on Friday with traders reluctant to take on new positions ahead of a clutch of important central bank meetings next week including the Fed, the Bank of Japan and the Bank of England.
“Despite the ongoing China Evergrande saga plus views from many that equities are due a correction, risk sentiment remains surprisingly supported. Expect another quiet FX trading session before a busy week of central bank meetings,” ING analysts said.
The offshore yuan traded at 6.4526 to the dollar, pressured by growing worries about China’s real estate sector as investors fear property giant China Evergrande could default on its coupon payment next week. The Evergrande saga follows a series of regulatory clampdowns in China that has knocked investor confidence in the local stock market, as well as signs growth there is slowing.
“The continued uncertainty over news out of China, with anything from tech to property firms taking a hit, has yet to offer much of a blow to ongoing risk sentiment but must be closely watched for signs of contagion,” said Jeremy Thomson-Cook, chief economist at business payments firm Equals Money.
Still, on a trade-weighted basis, the yuan stood near its highest level in five years, both in the onshore and offshore market.
"While we doubt that the FOMC will set out a plan for tapering its asset purchases, the new economic projections may shed some light on its reaction function given building cyclical inflationary pressures," wrote Jonathan Petersen, markets economist at Capital Economics, in its latest research note. Our view remains that inflation in the U.S. will stay elevated for longer than the FOMC and investors currently anticipate, in turn supporting higher U.S. yields and a stronger dollar," he added.
The University of Michigan consumer sentiment for September inched higher to 71 versus the final August reading of 70.3, but overall analysts said the rise was nowhere near the improvements seen in the Empire States and Philadelphia Fed manufacturing surveys
Fed meeting on horizon
More than 60% of economists expect the first change in bond purchases to take place in December, according to the latest Reuters poll, which also showed them cutting their forecasts for 2021 economic growth.
“It is hard to be enthusiastic to begin reducing purchases if the pace of (job) gains has slowed a lot,” said William English, a Yale School of Management professor and former Fed official who helped shape the bond-buying program initiated by the central bank in response to the 2007-2009 financial crisis and recession. They will want more data,” English said. “And if it is disappointing, they conceivably end up waiting ... It is a tricky statement. They want to open the door but not commit. That is the mission.”
That dilemma raises the stakes for the next U.S. employment report, which is due to be released on Oct. 8. That data is likely to show whether the Delta variant of the coronavirus is having a deeper impact than Fed officials anticipated earlier in the summer when they said the economy appeared to be divorcing itself from the pandemic.
The Fed will hold its next policy meeting on Tuesday and Wednesday, a session that will include the release of fresh economic projections and a new read on officials’ interest rate expectations. The projections will incorporate a volatile summer of data that included job gains of nearly 1 million in both June and July before the drop off in August, unexpectedly strong inflation numbers, and a surge of COVID-19 infections and deaths that eclipsed last summer’s viral wave.
The Fed in December said it would not change the bond purchases until there was “substantial further progress” in reclaiming the 10 million jobs that were missing at that point because of the pandemic.
Binding policy closely to the level of pandemic job losses made sense at the time, with the country worried about a new slide into recession and COVID-19 vaccines yet to be widely distributed. It now leaves policymakers dependent on a jobs revival that has run in fits and starts, shaped by forces as disparate as childcare availability or opposition to mask-wearing mandates in large states like Florida and Texas and their effect on hiring and people’s ability to work.
As of August the economy had clawed back fewer than half of those 10 million missing jobs. Other relevant statistics, like the employment-to-population ratio, are short of what policymakers like Richmond Fed President Thomas Barkin, also a voting member of the FOMC this year, have said they want to see before concluding that the job market was repaired enough to begin reducing the bond purchases.
With inflation also higher than expected for most of the last several months, other officials have said the bond purchases should end by early next year. However, a recent weakening of inflation, as expected by many other Fed officials, may temper any sense of urgency to act faster.
That kind of division over policy, in an era when economic data have veered from frightening to ebullient, means the Fed will want to keeps its options open in the weeks ahead, said Tim Duy, chief U.S. economist at SGH Macro Advisors and an economics professor at the University of Oregon.
“They will do something like 2013. Clear the way to taper at any future meeting,” Duy said.
In 2013, the Fed introduced language at its September meeting that began a turn towards eventual reduction of its last round of “quantitative easing” after the financial crisis. At that meeting the Fed noted the economy showed “underlying strength” despite a pullback in federal government spending. But because the impact of that “fiscal retrenchment” remained uncertain, “the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”
It repeated that language at its next meeting, before actually reducing its bond purchases in December 2013. This time it’s the Delta variant that is posing risks.
Many economists contend that attention to the taper discussion is overblown, and that a difference of a month or two in terms of when the Fed begins or ends it makes little difference. But it will send a potent signal that U.S. monetary policy is closing the books on the crisis, and will train focus on the next phase of debate over when inflation will require the Fed to raise its benchmark overnight interest rate - federal funds rate - from the current near-zero level.
It’s a call Fed officials want to get right.
“The macro stakes around the timing are rather low,” said David Wilcox, a former Fed research director who is now a senior fellow at the Peterson Institute for International Economics. “What is important is the inference that can be drawn about how they are reading the inflation tea leaves. How anxious are they to wrap up their bond-purchase program in a timely manner before they might want to raise the (federal funds) rate? That is why this decision is of more than passing interest.”
COT Report
EUR shows the same trend in sentiment. Investors close positions in EU currency. Recent report stands for 14th of September and doesn't show yet the big impact of recent Retail Sales data. But, even without it, we see big drop in open interest. The most interesting thing in this report that no changes are come from speculators. They just barely contracted their positions. But the drop has come from hedgers, long-term investors. It's just big run out. Data shows that investors do not care of the sign of recent statistics and other news - they just close their positions. Speculators, by the way also have closed positions with equal amount of longs and shorts. it means that unfortunately we can't count on any sharp reversal of EUR any time soon.
Continued in next post...