Doubts Fed might slow rate increase pace undermine dollar


US dollar bearish bets jumped to $3.14 billion from $0.66 billion against the during the previous week, according to the report of the Commodity Futures Trading Commission (CFTC) covering data up to November 21 released on Monday November 27. Dollar sentiment deteriorated dramatically as minutes spurred doubts whether the Federal Reserve would actually implement the rate hikes at pace previously in light of sluggish inflation.

The economic data during the week were positive: retail sales rose 0.2% in October while no change was expected. Industrial production climbed 0.9% in October, above a 0.6% forecasted gain. Existing home sales jumped 2% to an annual pace of 5.48 million in October, from 5.37 million the previous month. But as inflation slowed to 2% in October, in line with expectations, it highlighted the concern tight labor market has not resulted in accelerating inflation yet. And Federal Reserve October 31 - November 1 meeting minutes indicated some Fed officials said “there was some likelihood that inflation might remain below 2% for longer than currently expected.” Minutes raised the likelihood central bank may slow the pace of rate increases in 2018 in light of sluggish inflation. Against the background of dovish Fed minutes investors built net short bets against the dollar. As is evident from the Sentiment table, sentiment deteriorated for all major currencies except the British Pound , euro and yen . And the Canadian and Australian dollars together with euro remain the three major currencies held net long against the US dollar.

CFTC Sentiment vs Exchange Rate

November 21 2017BiasEx RateTrendPosition $ mlnWeekly Change

commitment of traders net long short

commitment of traders weekly change

market sentiment ratio long short positions

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