Key Wins NZ Election, JPY Not So Crowded

The New Zealand dollar starts the week a quarter-cent higher after John Key secured his third term as PM. Last week the Canadian dollar was the best performer while the yen lagged. Interestingly enough, the latest CFTC data shows that bets against the yen aren't as crowded as you might think.

The Asia-Pacific calendar starts the week off quietly but the market breathed a sigh of relief as Key won 61 seats in the 121-seat parliament. An extra 4 seats from coalition members gives him a solid majority. The result was generally expected but NZD/USD perked up to 0.8155 from 0.8120 at Friday's close.

Other moves have been small but we note some minor GBP/USD strength in what could be a sign that frightened real money that exited the pound during the referendum fright is creeping back in. That will be a theme to watch in the weeks ahead.

On the weekend, the G20 communique refrained from rocking the boat in any way by avoiding all mention of Russia.

The euro is flat so far but could get a lift after Moody's affirmed France's rating late on Friday despite rumors of a downgrade. That could be counteracted by weekend comments from ECB governing council member Coeure who said the ECB is ready to act again if needed. He hedged that by saying it's too early to judge the impact of the latest measures.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +. EUR -137K vs -157K prior JPY -83K vs -101K prior GBP -6K vs +27K prior AUD +22K vs +41K prior CAD +8K vs +12K prior CHF -11K vs -14K prior NZD +1K vs +10K prior

We'd caution against reading anything into the GBP numbers because they were very fluid before and after the polls.

What stands out is the lack of conviction in USD/JPY longs. 83K is a decent sized position but given the past enthusiasm for the pair, don't be surprised to see that get a lot more crowded. It gives us optimism that 1.10+ is possible.