The Dollar has posted small losses in the past 36 hours but in trade-weighted terms is broadly unchanged from 10th December. This is challenging the Dollar-bearish consensus view which continues to prevail in parts of the market and analyst community. Net-short speculative positions against the Dollar exceeded $10bn on 12th January, their highest level in nearly three years according to US Commodity Futures Trading Commission data.
The stability of the “safe-haven” Dollar in the past six weeks despite decent global risk appetite, as measured by the 2.7% rally in the S&P 500, suggests that other sub-sets of the investor community are perhaps less bearish the Dollar at these levels. In particular central banks and sovereign wealth funds, which were likely diversifying out of Dollars into other reserve currencies between May and early December, may think that valuations in currencies such as Sterling have become stretched. The GBP/EUR cross has traded in a narrow range since 14th January.
The macro data calendar is reasonably light today with the exception of the release of German ZEW economic sentiment figures for January.
