Archived IMT (2008.12.23)

Speculators remain net short the single currency against the dollar but these positions have gradually diminished (rising blue graph) as the euro staged a broad rally on the back of negative US fundamentals. With ECB interest rates seen closer to their low than the Fed funds rate, currency markets will be incentivized to drive net EUR shorts into long territory as the yield differential dictates flow activity. GBP's sell-off has given futures traders little reason to pare down their net shorts, as these remain at 30,400, close to September's record high of 49,359 contracts. Speculators and position traders will continue to pay close attention the broadening rhetoric inside the Bank of England about interest rates nearing zero%.