Sentiment towards the USD is bullish but continues to fade. The net position of $37.7bn has narrowed since its high of $49.5bn in November 2014. The bulk of the position continues to be held against EUR, with the short JPY having narrowed to just $1.5bn. Overall, the data suggest that sentiment for a strong USD is slowly fading, but that traders are still far from bearish
Euro sentiment was little changed w/w, widening a relatively modest $0.5bn to $28.8bn. Investors have added risk to both the long and short side over the past two weeks, underscoring the current environment of uncertainty.
Wednesday will be the key day next week for macro watchers as both the FOMC statement and Q1 GDP that morning will shape much of the week’s market tone. Contributing to the broad sentiment across asset classes will be another heavy week for US earnings.
This will be a statement-only affair with no forecast update or press conference. While ‘several’ FOMC officials signaled support for a June hike in the minutes to the March 18th meeting, we think there will be less support for doing so this time around and that the minority preference for June among some voting and nonvoting members won’t sway the top of the house. Key FOMC officials like Chair Yellen, Vice Chair Fischer and Governor Powell have repeatedly flagged the prospect of rate hikes commencing ‘later in the year.’ This language is reminiscent of the taper debate when Chair Bernanke used the same words to signal possible reductions in bond purchases by late 2013 and tightened up the time period reference in the language that was chosen as the date drew nearer.
Euro zone finance ministers warned Greece on Friday that its leftist government will get no more aid until it agrees a complete economic reform plan, as Athens lurches closer to bankruptcy. European Central Bank President Mario Draghi said the ECB would go on allowing emergency lending to Greek banks as long as they were assessed as solvent. But he cautioned that soaring Greek government bond yields were diminishing the value of the collateral that the banks present to get funds.
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