USD Net Short Positions Increase<\/p>\n
GBP net positions have shifted to net short for the first time in 22 weeks, driven by an increase in short positions. JPY net long positions have declined due to a rise in short positions.<\/p>\n
The FOMC maintained the policy rate at 4.50%, anticipated by the market. Disappointing nonfarm payrolls at 73,000 and a revision of -258,000 over two months have positioned the market for approximately two and a half rate cuts by year-end.<\/p>\n
The ECB maintained its policy rate at 2.00% with Eurozone unemployment dropping to 6.2%. A 25bp cut at the August 7 BoE meeting is anticipated, likely lowering the target rate to 4.00%.<\/p>\n
Japanese Nationwide CPI inflation for June was 3.3% year-over-year. An agreement between the US and Japan includes Japan’s commitment to invest $550 billion in American industries and a 15% tariff on Japanese exports to the US. JPY was the worst performing G10 currency in July.<\/p>\n
We’re seeing a clear bearish turn on the US dollar, which should guide our strategy. The July nonfarm payrolls report was a major disappointment, coming in at just 73,000 and wiping out over a quarter-million jobs from previous months. This has cemented expectations for the Federal Reserve to start cutting rates, possibly as soon as their September meeting.<\/p>\n
Sharp Reversal in Sterling Positioning<\/p>\n
The sharp reversal in sterling positioning is a major signal for us this week. After holding net long positions for 22 consecutive weeks, the market is now betting against the pound. This lines up perfectly with the widespread expectation of a Bank of England rate cut to 4.00% at its meeting on August 7th.<\/p>\n
Given these dynamics, we should consider strategies that benefit from a falling dollar. Options that capitalize on further US economic weakness, like buying puts on USD indices, seem attractive. The market is positioned for about two and a half Fed cuts by year-end, and any new data confirming this trend could accelerate the dollar’s decline.<\/p>\n
The euro presents a more complex picture for us right now. While the European Central Bank is holding rates steady at 2.00% and unemployment has fallen to a strong 6.2%, traders are reducing their bullish bets. This suggests caution, and we might see the euro trade sideways against a basket of currencies until a clearer trend emerges.<\/p>\n
The Japanese yen continues to face significant pressure, a trend we saw throughout July when it was the worst-performing G10 currency. Despite June’s high inflation reading of 3.3%, the new 15% US tariff on Japanese exports is a major blow to their economic outlook. This is likely why traders are increasing their short positions against the yen, expecting it to weaken further.<\/p>\n
This environment could make yen-funded carry trades attractive again, but with a twist. Instead of funding longs in US dollars, which are expected to weaken, we could look towards more stable currencies. Positioning for a stronger euro against a weaker yen could be a viable strategy in the coming weeks.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" USD shorts rise, EUR and GBP positions shift, central banks hold rates, JPY weakens amid trade deal.<\/p>\n","protected":false},"author":62,"featured_media":17023,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-28178","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/28178","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=28178"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/28178\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/17023"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=28178"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=28178"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=28178"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}