Speculators Take Big Positions, Including Shifting to Net Long Mexican Pesos

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In the CFTC reporting period ending April 21, speculators to significant positions in the euro, sterling and the Mexican peso.   Bulls and bears were took more exposure in the euro and sterling, while in the peso the former added on while later sought cover.  

The gross longs rose 12.2k contracts in the euro to stand at 185.8k contracts. It is the fifth week in the past six that the bulls added to their stockpile.   The Bloomberg data suggest this is a record large gross long position, days before the French presidential election.  Speculators have pared their long position in only four weeks this year.    But to be sure, the shorts have not capitulated.  The gross position rose by nearly 15k contracts to 207.4k.  This is the largest gross short euro position of the year.

The reporting period ended several hours after UK Prime Minister May called for a snap election, after spending nine months denying it.  The traditional focus on the net position fails to recognize the what happened as the net position slipped an inconsequential 6.4k contacts.  However, the bulls added 16.4k contracts to lift the gross long position to 48.3k.  It is the third increase in four weeks, during which time the gross long position has risen by 50%.  The bears sold another 10.1k contracts to raise their gross short position to 147.8k contracts.  It was the second weekly increase, and remained near the record set last October near 154k.

The net Mexican peso position swung to the long side for the first time in two years.  Some may see in this the unwinding of the so-called Trump trade.  Remember too that the central bank changed its intervention tactics.  The central bank balance sheet bears risk of the currency swaps not the international reserves.  And the central bank has hiked rates, which bolsters its anti-inflation credibility.  The shift to the net long position has been more about net long coming into the market than shorts covering, which is also something that the traditional emphasis on net position obscures.

The bulls added 10.2k contracts to the gross long position.  It stands at 97.0 contracts, up from 21k at the end of last year.  The bears bought back 16.7k contacts to reduce the gross short position to 82.8k contracts.  It was decline in five weeks and is essentially unchanged now on the year.

The speculative net short 10-year Treasury note futures was cut by a third to 41.3k contracts.  It is the smallest net short position since last November.  This was primarily the function of the gross long position rising 24.3k contracts to 706.6k.  At the end of February it stood at 472k contracts.  The bears added 1.1k contracts to the gross short position.  It stands at 747.9k contracts.  It peaked at the end of February at a record 882k contracts.

In the light sweet crude oil futures the bulls liquidated 8.1k contracts and the bears covered 14.9k contracts.  The gross long position stands at 637.8k contracts, while the gross short position is 194.0k contracts.  Since the reporting period closed, the price of oil for June delivery fell $3.2 a barrel.

18-Apr        Commitment of Traders
Net  Prior  Gross Long Change Gross Short  Change
Euro -21.6 -19.0 185.8 12.2 207.4 14.9
Yen -30.5 -34.8 45.8 2.4 76.2 -1.9
Sterling -99.5 -105.9 48.3 16.4 147.8 10.1
Swiss Franc -13.8 -10.1 10.8 -2.3 24.6 1.4
C$ -33.3 -32.3 37.3 5.9 70.6 6.8
A$ 43.3 45.2 70.4 -6.4 27.1 -4.5
NZ$ -15.0 -15.2 18.3 -0.7 33.3 -0.8
Mexican Peso 14.2 -12.7 97.0 10.2 82.8 -16.7
(CFTC, Bloomberg) Speculative positions in 000’s of contracts