CFTC Currency Futures Market Data Points to Weaker Pound Sterling (GBP), Proven Accurate

April 5, 2016 - Written by John Cameron

STORY LINK CFTC Currency Futures Market Data Points to Weaker Pound Sterling (GBP), Proven Accurate

While not for predictable reasons, the expectation that the Pound will weaken has been proved accurate today, as the Pound has crashed against most peers due to the widening implications of the British Virgin Islands being used as a global tax haven.

US Dollar (USD) Exchange Rate Bull Run Coming to an End?

The latest Commodity Futures Trading Commission (CFTC) data, published last Friday, suggested that the bull run which the US Dollar (currency : USD) has staged since the latter part of last year, may be coming to an end. The statistics revealed that investors scaled back their bets that the Buck will strengthen for the fourth week on the trot during the seven days up to 29th March.

The drop off in the total number of ‘net longs’ on the Greenback from a total of USD5.91bn the previous week to a significantly lower $4.65bn at the last count show a groundswell of opinion that the US Federal Reserve does not now have the scope to edge up its headline interest rate as quickly as had been previously expected.

However, the statistics cover a period which ended before last Friday’s go-ahead US Non-Farm Payrolls data which showed that once again over 200,000 new jobs had been generated in the world’s premier economy last month. This Friday’s CFTC figures are therefore forecast to show a bounce-back from the Buck.

Sentiment towards GBP Exchange Rates Damp

Meanwhile, the CFTC numbers revealed that sentiment towards the Pound Sterling (currency : GBP) had soured during the week ending 29th March. Investors were net short the Pound to the tune of $40.03bn at the last count – up from $37.72 bn the week before, evidencing the negative effect which the upcoming UK In / Out European Union Referendum is having on the UK unit.

Elsewhere, the tender which investors were most willing to hold, according to the CFTC numbers, was the safe haven Japanese Yen (currency : JPY). This fact is likely to garner the attention of Japan’s policymakers, who are desperate to weaken their local currency in order to make Japan’s exports more attractively priced in foreign markets and imports into Japan relatively more expensive.

Expect further policy loosening measures from the Bank of Japan, leading to a sharp move out of Yen-denominated assets, as a consequence.

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TAGS: American Dollar Forecasts Japanese Yen Forecasts Pound Sterling Forecasts