Intraday Market Thoughts

IMF Set to Cut Forecasts, Yen Shorts Cover

by Adam Button
Jul 7, 2014 0:03

The IMF is set to cut global growth forecasts in a reminder of how disappointing 2014 has played out. The US dollar struggled last week despite the blockbuster jobs data. The calendar is light to start the week around the globe but markets will have some weekend news to digest.

The main geopolitical headline was from the Ukraine where government forces seized control of separatist stronghold Slovyansk. It's now clear that Kiev has the upper hand in the conflict and that Russian forces aren't poised to storm across the border.

Markets had mostly moved past the conflict in Ukraine but some mild relief trades could begin. The larger flows are likely to be euro negative if and when the conflict is finally resolved. Money flooded into euros as a safe haven during the height of the crisis and most of it likely hasn't returned to Russia and Ukraine.

The more-lasting event in the week ahead is likely to be a cut in global growth forecasts from the IMF. On the weekend, Lagarde said forecasts will be “very slightly different” from the ones in April. The US along with some developing markets have lagged but another culprit the IMF will cite is disappointing investment spending.

Companies have been loath to spend on plants, production, equipment and IT. Economists repeatedly remark that the conditions are right for those types of outlays but in markets around the world but the results continue to disappoint and governments, central banks and traders will need to adjust.

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

  • EUR -61K vs -58K prior
  • JPY -59K vs -71K prior
  • GBP +56K vs +50K prior
  • AUD +39K vs +34K prior
  • CAD -3K vs -5K prior
  • CHF -7K vs +5Kprior
  • NZD +9K vs +6K prior
What stands out is the fall in yen shorts. Even though some USD/JPY weakness unwound in the latter part of the week, the inability of the US dollar to rally on good news should be a concern for US dollar bulls.


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