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CFTC data shows dollar percentage of open interest dropping the most last week, this is associated with bearish dollar positioning.
Our calculation of broad dollar positioning held by hedge funds vs G10 currencies turned net short this week, this sent % of OI in the dollar to -0.4%, 2.4 percentage points below its 5-year average
While leveraged funds' dollar positioning is far from stretched, the development is in focus as we head into key U.S. data and the September Fed decision. Broad USD positioning has not been this bearish since March 2023, this raises the risk of a short squeeze in the case inflation is higher than estimated
The largest increases in % of OI were recorded in CAD net shorts, NZD net longs, and GBP net longs. Sterling remains stretched net long as % of OI ticks at 26.3%, almost 20pp above its 5-year average
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