US Dollar Forecast Deteriorates Following Latest Release of CFTC Data

Modified: Tuesday, 16 February 2016 10:53 BST - Written by John Cameron

STORY LINK US Dollar Forecast Deteriorates Following Latest Release of CFTC Data

CFTC Data Dhows US Dollar 'Long Positions' Tumbled

The most recent estimates from the World Bank suggest that over 90% of the $5.3tn transacted on a daily basis in the global currency markets is put forward by speculators.

The positions taken by these institutional investors often last no more than a few seconds, but their significance is huge in shaping price action in the market as a whole. For example, the Governor of the People's Bank of China (PBoC) has blamed this practice for the volatility of the Yuan in recent weeks. For this reason, data published on a weekly basis by the Commodity Futures Trading Commission (CFTC) revealing the current positioning of these speculators is always closely-monitored by investors.

Last Friday’s CFTC data was particularly eye-catching, with one factor in particular grabbing the attention. The numbers revealed that the number of net ‘long’ positions, (i.e. ‘up-bets’), on the US Dollar (currency : USD) had tumbled to their lowest level since the middle part of 2014. The statistics, which covered the 7 days leading up to Tuesday 9th February, showed that net Dollar ‘longs’ plunged to $12.6 bn - down from the relatively heady $18.2 bn the previous week.

Federal Reserve Not Expected to Raise Rates until 2017 on Low Crude Prices

The numbers suggest that sentiment towards the US unit has rapidly cooled as investors priced in continuing ultra-low oil prices and the marked effect which this is having on American interest rate expectations. With the price of a barrel of Crude Oil remaining at, or below, $30 Stateside, there appears a fair percentage chance that the Fed will not now be raining its headline interest rate again until 2017. However, a meeting between Russia and Saudi Arabia today is giving investors a glimmer of hope that production might be cut, even if experts are still skeptical overall.

Given that the CFTC data only covered the week up until last Tuesday, and that Federal Reserve Chair Janet Yellen only began giving her 2-day testimony to American lawmakers on Capitol Hill on Wednesday, the suspicion remains amongst analysts that this Friday’s CFTC data will point to a further cooling of sentiment towards the Greenback. For this reason, the Dollar is forecast to trade on a neutral to negative footing against the Pound Sterling in the short to medium term.

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TAGS: American Dollar Forecasts