USD rebounds on COT data

Ole Hansen said on May 16 that the latest Commitments of Traders data pointed to a rebound in U.S. dollar positioning after a week in which inflation reports and a global bond selloff lifted yields and pressured major currencies. Hansen, Saxo’s head of commodity strategy, linked the move to renewed demand for the dollar in futures markets and to a broader repricing of interest-rate expectations. His comments came after U.S. consumer prices rose 0.6% in April and 3.8% from a year earlier, according to the Bureau of Labor Statistics, while Reuters reported that investors were increasingly bracing for higher rates as war-driven energy costs fed inflation. The CFTC’s weekly COT reports are published each Friday and show positions held as of the previous Tuesday. The May 15 release covered positions as of May 12, according to the CFTC and third-party presentations of the report data. That timing matters because it captures how hedge funds and other speculators were positioned as inflation data and bond-market moves began to reshape expectations for the dollar and rates. (bls.gov) ### What exactly did Hansen say the COT data showed? Ole Hansen said in his May 16 post that the COT figures showed a rebound in the dollar after inflation reports triggered bond selloffs across major currencies and futures markets. Hansen has used the same weekly framework in earlier Saxo research, where he wrote that geopolitical risk and euro liquidation had pushed aggregate dollar positioning higher against eight IMM currency futures. (cftc.gov) An earlier Hansen report published by Saxo on April 6 said gross dollar longs against eight IMM futures rose 55% in the week to March 31, lifting the aggregate net position to a four-month high of $11.6 billion from a $19 billion short before the Middle East war began. That earlier note does not describe the May 12 week, but it shows the measure Hansen uses when he describes a rebound in dollar positioning. (home.saxo) ### What do the latest CFTC tables show for dollar and euro futures? The May 12 COT report for ICE U.S. Dollar Index futures showed non-commercial traders holding 18,912 long contracts and 15,725 short contracts, for a net long position of 3,187 contracts. The weekly change showed long positions up by 1,864 contracts and short positions down by 630, according to Tradingster’s presentation of CFTC data. (home.saxo) The May 12 euro futures report showed non-commercial traders holding 224,002 long contracts and 183,802 short contracts, leaving them net long 40,200 contracts. Weekly changes showed euro longs rising by 6,528 contracts and euro shorts falling by 1,470 contracts, indicating that the dollar rebound Hansen described was not a simple one-way liquidation across all major currency futures, but part of a broader repositioning across markets. (tradingster.com) That is an inference from the contract-level CFTC tables. ### Which inflation reports and bond moves were driving the market? The U.S. Bureau of Labor Statistics said on May 12 that April CPI rose 0.6% month-on-month and 3.8% year-on-year, with energy up 3.8% in the month and accounting for more than 40% of the increase in the all-items index. Reuters reported on May 15 that hotter inflation readings led investors to increase bets that the Federal Reserve could shift toward rate hikes before year-end. (tradingster.com) Reuters also reported on May 15 that bond markets from the United States to Europe and Japan were bracing for faster rate increases as investors assessed the economic costs of the war with Iran. In Japan, Bloomberg reported that the 30-year government bond yield breached 4% for the first time since that bond’s debut in 1999, while Reuters said Brent crude rose 4% to above $109 a barrel during the bond rout. (bls.gov) ### Why did Hansen mention central banks and crude oil together? Hansen warned that central banks, including the Federal Reserve, could be forced to raise policy rates if war-driven price shocks keep feeding through energy and commodity markets. Reuters reported on May 15 that investors were beginning to price a Fed rate hike around the turn of the year after the week’s inflation data, while a Reuters poll published on April 22 found economists pushing expected Fed cuts further out because of war-related inflation risks. (money.usnews.com) Brent crude above $109 a barrel is central to that argument because higher oil prices feed directly into headline inflation and borrowing-cost expectations. Hansen’s earlier Saxo reports also tied stronger dollar positioning and commodity buying to the same war-driven demand shock, especially in Brent, grains and soft commodities. (money.usnews.com) ### When is the next test for this dollar-positioning story? The CFTC’s next weekly Commitments of Traders release is scheduled for May 22 and will cover positions held as of Tuesday, May 19, based on the agency’s standard reporting calendar. That report will show whether the dollar buying Hansen flagged on May 16 extended after the latest inflation data, the rise in Treasury yields and the move in crude oil. (cftc.gov) (money.usnews.com)