Intraday Market Thoughts

Fischer Focused on Inflation, CAD Shorts Flip

by Adam Button
May 25, 2015 0:25

Weekend comments from Fed Vice-Chair Stanley Fischer were largely ignored but his optimism on growth and concern about low inflation bears closer scrutiny. The trading week begins with mild US dollar strength. CFTC positioning showed fewer euro shorts and CAD traders caught wrong-footed.  After stronger than expected US core CPI figures on Friday and headline-gabbing remarks from Greece interior minister indicating his country has ran out of money,  EURUSD was stopped out and GBPUSD remains in progress.

The week begins with a holiday and the United States, Hong Kong, South Korea and parts of Europe so trading will be thin. The long weekend may have let Fischer slip some important comments in under the radar at a central banking conference in Portugal.

“It's sort of ironic that at the present we have an output target and we have an inflation target, which are supposed to be conflicting, but we're more or less there on the output target,” he said. “We are not there on the inflation target, so that we have to put in a lot more steam.”

Yellen has generally been concerned with improving employment and gaining confidence in 2% or better growth with a secondary focus on inflation. If Fischer believes the economy is at full capacity on output, it shows he believes hikes could be coming sooner.

For her part, Yellen was moderately upbeat in her speech Friday and brushed aside soft Q1 data once again.

Other news from the central bank forum included more prodding for structural reforms from Draghi while Kuroda reiterated the BOJ would reach its inflation target around the first have of FY 2016.

Looking ahead, today's Asia-Pacific calendar includes April Japanese trade balance at 2350 GMT. A deficit of 351.1B yen is expected.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -168K vs -179K prior 

JPY -22K vs -23.5K prior

GBP -23K vs -31K prior

AUD +7K vs +4.5K prior 

CAD +4K vs -4K prior

CHF +9K vs +10.5K prior

Given the renewed slump in the euro, that was probably a short term 'bottom' in net shorts. If you're a USD/CAD long, the report is good news. It shows a balanced market before the latest rally in the pair. If oil sinks, the pair could have plenty of upside.

Act Exp Prev GMT
FOMC's Mester speech
May 25 16:00
Fed's Stanley Fischer speech
May 25 16:45
Adjusted Merchandise Trade Balance (MAR)
¥3.3B May 24 23:50
Merchandise Trade Balance Total (MAR)
¥-318.9B ¥229.3B May 24 23:50

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