US dollar bullish bets slip on mixed data

The nonfarm payrolls added just 98 thousand jobs in March while 180 thousand new jobs were expected. And average hourly earnings rose only 0.2% as previous month’s reading was revised upward by one tenth to 0.3%. Slowing of services sector’s expansion was another negative development as both the Markit’s and ISM Services Indexes declined from 53.8 and 57.6 to 52.8 and 55.2 respectively in March. Another sign of slowing real economic sector was the 0.4% rise in wholesale inventories in February. The dollar got a lift however from hawkish Fed minutes as they revealed policy makers plan to reduce central bank’s $4.5 trillion balance sheet later this year. Several policy makers expressed confidence in the continued strengthening of inflation and labor market, and minutes confirmed they still expect rates to rise gradually, unless the economy suddenly overheats. Investors reduced the dollar bullish bets. As is evident from the Sentiment table, sentiment deteriorated for all currencies except of the Japanese yen and Swiss franc. And the Australian dollar is still the only major currency held net long against the US dollar.

The euro sentiment improved after establishment candidate Emmanuel Macron won in the first round of the French presidential election relieving fears of a euroskeptic-only runoff on May 7. Macron, who favors stronger ties between France and the European Union, will face off against the National Front’s Marine Le Pen who has pledged to take France out of both the European Union and the euro if she wins. The net short euro position declined $49 million to $2.85bn. Investors cut both the gross longs and shorts by 27955 and 28709 contracts respectively. The British Pound sentiment improved after UK Prime Minister Theresa May unexpectedly called an early general election which was approved by UK parliament. Analysts expect May will win a bigger mandate enabling the conservative party to stand up to backers of so called hard exit from the EU. The net short position in British Pound narrowed $0.67bn to $7.31bn as investors increased the gross longs and covered shorts by 5702 and 2606 contracts respectively. The bearish Japanese yen sentiment moderated as Japan posted a 614.7 billion yen trade surplus in March. The net short position in yen narrowed $0.51bn to $3.0bn. Investors built the gross longs and covered shorts by 2777 and 817 contracts respectively.

The Canadian dollar sentiment continued to deteriorate as both the headline and core inflation rates declined in March, to 1.6% and 1.3% from 2% and 1.7% respectively. The net short Canadian dollar position widened $0.66bn to $3.14bn. Investors increased both the gross longs and shorts. The bullish Australian dollar sentiment moderated as net longs fell by $53 million to $3.22bn. Investors cut both the gross longs and shorts. The sentiment toward the Swiss franc deteriorated as the net shorts widened by $0.45bn to $2.18bn. Investors cut the gross longs and built shorts.