US dollar net longs rise on payroll surprise

US dollar bullish bets rose to $8.0 billion from $4.1 billion against the major currencies during the previous week, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to July 12. The strong jobs report for June was a surprise which supported the US dollar. Nonfarm payrolls increased 287000 in June after increasing merely 11000 in May. The unemployment rate rose to 4.9% from 4.7% in May but the change reflected a rise in participation rate to 62.7% from 62.6% as more discouraged workers joined the labor force. The continued strength of labor market assured investors US economic recovery has not stalled as a low May payrolls increase led many to worry. The strong June payrolls report revived the chances for a rate hike by Federal Reserve this year at a time when other major central banks are forced to come up with new stimulus measures to boost their economies and stave off deflation. As is evident from the Sentiment table, sentiment deteriorated for euro, British Pound, Swiss franc and Japanese yen. And Australian dollar, Swiss franc and Canadian dollar remained the three major currency held net long against the US dollar.

The bearish euro sentiment continued to deteriorate as the net short position in euro widened at roughly the previous week’s pace rising by $1.7bn to $12.1 bn. The euro accounts for over 70% of gross short position against the dollar. The net short position in euro increased as investors cut the gross longs by 2376 contracts and built the shorts by 7957 contracts respectively. The British Pound sentiment deteriorated ahead of the Bank of England interest rate decision on July 14 with the pace of increasing net short bets in British Pound doubling from previous week as net shorts rose by $0.98bn to $4.9 billion. The net short position in British Pound widened as the gross longs were cut by 5747 contracts and the shorts were increased by 5289. The bullish Japanese yen sentiment weakened significantly with the net long position in Japanese yen falling by $2.1bn to $5.6bn. Investors here too cut the gross longs and increased the shorts by 1673 and 14350 contracts respectively.

The sentiment continued to improve for the Canadian dollar with the net longs rising by $0.4bn to just $1.3 billion. Investors cut both the gross longs and the gross shorts. The bullish sentiment strengthened considerably for the Australian dollar with net longs rising to $1.2 billion from $366 million. Investors built both the gross longs and the shorts. The sentiment continued to deteriorate for the Swiss franc with the net long position narrowing at previous week’s pace falling by $261 million to $0.8 billion. Investors reduced the gross longs and increased the gross shorts.