BNP Paribas FX Positioning Analysis

EUR positioning neutral at year end

  • The BNP Paribas’ FX Positioning Analysis shows investors remained short the EUR for most of the second half of 2014
  • At year end, investors appear to be positioned neutral in the EUR, as the ECB disappointed hopes for new measures in December, causing investors to pare back their short EUR positioning from the autumn.
  • Going into 2015, we continue to anticipate a substantial broadening of the ECB’s asset purchasing programme, leading to the EUR being used as a funding currency and investors establishing extreme short EUR positions.

Long USD a favoured trade heading into 2015

  • The BNP Paribas’ FX Positioning Analysis shows investors remained relatively neutral the USD for most
    of the first half of 2014.
  • During the second half of 2014, investors began to build a large long position in expectation of the FOMC ending its QE programme in October, in line with the timeframe signalled by Fed Chair Yellen earlier in the year.
  • With a score of +36 at year end, long USD positioning is at its highest level in 2014, but below the May 2012 reading, leaving scope for the USD to strengthen further into 2015.

Scope for bearish JPY positions to rebuild into 2015

  • The BNP Paribas’ FX Positioning Analysis shows investors remained short the JPY during 2014.The low point came in November when the Positioning Analysis started to flag that the JPY was susceptible to a short squeeze.

  • In hindsight this proved correct as the Positioning Analysis for the JPY indicates a score of -27 compared with the November reading of -39. At year end, net positioning in the JPY is only moderately short, leaving scope for investors to rebuild short JPY positions going into 2015.

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