US dollar bullish bets fall on disappointing sales and inflation reports

Investors cut net long dollar bets to $9.8 billion from $11.31 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 August 16. Recent economic data failed to alleviate concerns US economic recovery is slowing down. Following disappointing factory orders for June which showed factory orders accelerated declines, and data showing nonfarm productivity continued falling in the second quarter with services sector expansion slowing in July, July retail sales and inflation reports painted a picture of weakness for consumption and consumer prices too. Retail sales were flat in July compared with the previous month while headline inflation fell to 0.8% from 1.0% in June. Housing sector data also indicated housing starts slowed to 2.1% from 5.1% in June while building permits fell 0.1% after 1.5% rise in June. Falling inflation is the opposite of what Federal Reserve needs to justify raising interest rates, and inflation far below the 2% target rate Federal Reserve has identified as a threshold for hiking rates makes it unlikely the central bank will move to raise rates soon. The reports did little to address concerns US economic growth is slowing down after disappointing second quarter GDP data. Investors cut the bullish bets on US dollar. As is evident from the Sentiment table, sentiment deteriorated for British Pound, Canadian dollar and Swiss franc. And Japanese yen, Australian dollar and Canadian dollar remain the three major currencies still held net long against the US dollar.

The bearish euro sentiment improved as the net short position in euro fell $0.6bn to $13.0bn. The net short position in euro narrowed as investors increased the gross longs by 2618 contracts and covered the shorts by 3273 contracts respectively. The British Pound sentiment deteriorated further as the Pound net short rose by $0.36bn to $7.68 billion. The net short position in British Pound increased as investors built the gross longs by 367 contracts and the shorts were increased by 4523. The bullish Japanese yen sentiment further intensified with the net long position in Japanese yen rising at roughly the previous week’s pace by $0.98bn to $6.9 bn. Investors increased the gross longs and cut the shorts by 1554 and 5621 contracts respectively.

The sentiment continued to deteriorate for the Canadian dollar with the net longs declining by $0.20bn to $0.97 billion. Investors built both the gross shorts and gross longs. The bullish sentiment further intensified for the Australian dollar with net longs rising by $0.48bn to $2.67 billion. Investors continued to build the gross longs as they increased the shorts. The sentiment deteriorated again for the Swiss franc with the $14 million net long position turning into $201 million net short. Investors reduced the gross longs and increased the shorts.