Positioning report for 2015 – Citi


18 November, AtoZForex.com, London – On FX positioning bases, Citi has analysed the market by looking at the main FX flows of 2015. From the data a possibility of global risk reduction into the year end occurs. The following are four Citi highlights from the positioning report for 2015.

First, NZD and USD were the most bought currencies over the span of 2015. Meanwhile EUR, JPY and SEK were the most sold. Clearly, NZD buyers regret the decision.

Second, “In the very long run – Real Money are much more overweight EM & EM Asia than Hedge Funds,” Citi notes. To be more precise, 9 times as much.

Third, some positioning consensus appears as we near towards the year end – notably short EUR and short Asian currencies. Real Money accounts and Hedge funds are actively re-balancing their EM Asia risk into CEEMEA and LatAm, Citi pointed out, adding that it expects further “re-balancing risk” going into 2016.

Fourth, hedge funds have not yet fully unwound their long AUD and long GBP positions which may now face “flattening risk” at the end of 2015.

Combination of the four highlights suggests that as 2015 winds close to an end, clients will be forced into further global risk reduction – centered on Asia. Given the volume of the held positions, 2016 might not open in the traditional “risk on” environment that traders have become accustomed to.

CHF outlook and data expectations

Recent Swiss rates have turned even more negative, leading to overall bearish view for CHF. Moreover, investors are now pricing possible indirect SNB actions caused by the anticipated ECB policy easing.

Consider reading: CHF outlook – SNB reactions to ECB actions

In terms of event risk, “Swiss exports on Thursday hold the largest potential for disappointment,” Citi projects, further down the calendar, “Swiss GDP prints the day ahead of ECB, with confidence surveys suggesting a negative print on a quarterly basis.”

Targeting a move in USDCHF towards 1.0240, Citi does not have immediate event risk to point to, instead the bank argues that investors are too relaxed on prospects for further USD strength.

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