Interest rate cuts are expected to heat up

Release time：Jun 12, 2019 From：admin

A few days ago, as the expectations of the Fed’s interest rate cuts continued to heat up, the market’s sentiment on the US dollar has cooled significantly. Investors such as hedge funds have begun to cut their holdings of US dollars. Industry insiders predict that if the Fed further releases the "doves" signal in the future, more bulls may choose to leave the market.

US dollar net position fell

According to the latest weekly data released by the US Commodity Futures Trading Commission (CFTC), in the week ended June 4, large net worth investors such as hedge funds held US$33.32 billion, a record since April this year. Low, the previous week was $34.61 billion.

Among the major non-US currencies, the decline in the size of the euro and yen net positions, which accounted for the highest proportion of the dollar index weights, was the most obvious.

As of the week of June 4, the euro's speculative headroom held by hedge funds fell by 12,140 contracts futures and options contracts to 87,551 contracts in the previous week; the yen's speculative headroom position was significantly lower than the previous week. 11188 contracts, to 44,389 contracts.

In addition, boosted by factors such as a weaker dollar, hedge funds held a gold speculative net-long position that increased by 69,427 contracts to 156,115 contracts.

During the statistical period, a number of Fed executives released a signal to cut interest rates, making market participants further bet that the dollar is about to weaken. On June 4th, Fed Chairman Powell said that the Fed is closely monitoring the impact of some recent problems on the US economy and will take appropriate measures to ensure that economic growth can continue. He stressed that the Federal Reserve Fund rate will once again approach the zero interest rate range "not a surprising thing." On June 3, this year's voting member, St. Louis Fed President Brad also said that the Fed may soon have a reason to cut interest rates in order to boost inflation. This is the first time the Fed's voting committee has actively supported interest rate cuts.

The dollar is expected to become stronger

As the interest rate cuts are expected to heat up, the market's expectations for the Fed's peak are also growing.

Giuseppe, chief investment officer of the well-known hedge fund Premium Capital Advisors, said that the exchange rate of the US dollar against many major developed market currencies has begun to “top”. In the future, as US Treasury yields continue to fall, the spread will gradually shrink, meaning that the US dollar may Going soft.

In the latest report, Morgan Stanley expects that the Fed will release the "doves" view in the current comprehensive inflation and other factors. If the Fed will take loose action at that time, it will undoubtedly suppress the dollar.

Insiders pointed out that the latest two major employment data showed “big surprise”, which further deepened the market's expectation of a bearish dollar. In the next cycle, hedge funds may continue to reduce their holdings of US dollar positions. The ADP employment report released last Thursday showed that the number of new jobs in the US was only 27,000 in the month, far lower than the 271,000 in April, which was also worse than the market's previous forecast of 175,000, which was set in 2010. The lowest value since the month. According to the non-agricultural employment data released by the US Department of Labor last Friday, the number of non-farm payrolls in the US increased by only 75,000 in May, far below the market expectation of 180,000.