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Bearish GBP and USD positions reduced

Danske Research Team from Danske Bank A/S at 11/09/09


The latest IMM data covers the week from 27 October to 3 November. Speculative investors further reduced their dollar short positions ahead of last week’s FOMC meeting and the US employment report. The reduction in short US dollar  positions coincided with further losses on equity markets and the move in EUR/USD below 1.47.
The IMM data also shows that short GBP positions were reduced ahead of the BoE meeting, at which the Bank increased its asset purchase programme by a  less-thananticipated. GBP25bn. Nevertheless, when looking at GBP/USD, there is little evidence of the change in speculative positioning, as the spot was roughly constant over the week covered by the data. The fact that significant short GBP positions remain in place suggests that large upside potential remains for sterling.
Mirroring the reduction in risk appetite during the week covered by the data, long positions in the safe-haven currencies CHF and JPY were increased, while the commodity currencies (AUD, NZD, CAD) all saw their long positions reduced. Significant long positions in the pro-cyclical remain in place (e.g. in NZD), and while risk sentiment has since improved, these currencies could be vulnerable to a position squeeze.

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