According to the latest CFCT Commitment of traders data short positions in the US dollar increased by factor of six last week to 67,500 rising to their highest level in a month. The positioning suggests that speculators are anticipating further dollar weakness in the week ahead, but their short bias may be subject to a squeeze if risk aversion flows reappear.
With the exception of Australia which reported very strong labor data last week, economic new from the rest of G-20 block was generally disappointing. In UK Manufacturing and Industrial Production reports missed expecations, in Eurozone the Trade Balance printed weaker than expected as higher currency rates finally took their toll on trade and in US the Retail Sales numbers shocked to the downside at -0.3% versus 0.4%. Meanwhile equities appear to have stalled at the 10,700 level for the DJIA despite strong earnings data from financials and high tech sectors as the index tumbled more than 100 points on Friday.
This week the economic calendar is relatively light once again, but there are several key reports that could impact the market. In UK the claimant count and retail sales numbers will be key to setting the tone in the pound. In EU the flash PMI data for January will offer the latest evidence of strength or weakness of the recovery in the 16 member union and in US the weekly jobless numbers could be key in determining whether the improvement in labor markets has ended. If the economic news this week surprises to the downside triggering further profit taking in equities, the greenback could see a rally on safe haven flows as specs are forced to unwind their freshly laid dollar shorts.
Comments