Onto Consumers, Month-End & Fed

The US dollar initially jumped after Friday's release of strong headline Q1 GDP number but the details sparked a rethink. CFTC positioning data hinted a why dollar bulls are so uneasy. Take a look at the chart of USDX spec net longs below.  Key US data on personal spending and core PCE price index is due next. The combination of month-end flows, Wednesday's Fed statement and BoE's Inflation Report & minutes will be crucial for the markets.

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The kneejerk market reaction to the first look at Q1 US GDP was to buy the US dollar. The economy expanded at a 3.2% pace, far in excess of the 2.3% expected. Immediately, the dollar just a quarter-cent across the board but almost as quickly it reversed the second move was larger and longer-lasting.

That's because one-off factors were behind the gain as inventories add 0.65 pp, net trade added 1.03 pp and government spending contributed 0.41 pp. Those are all likely to reverse. Strip them out and growth was just under 1.2%. Ashraf warned about the inventories factor on Twitter minutes prior to the GDP release on here here.

Another market mover on Friday was oil as it fell more than 4% at one point on a combination of profit taking from weeks of gains and Trump saying he “called OPEC” and asked them to lower oil prices. Saudi leaders and the OPEC secretary general both denied speaking with the President but the damage was done. 

CFTC Commitments of Traders

EUR -105K vs -98K prior GBP -2K vs -1K prior JPY -94K vs -87K prior CHF -38K vs -33K prior CAD -47K vs -49K prior AUD -50K vs -47K prior NZD -5K vs -3K prior

The euro net short hit a fresh extreme since December 2016 but it's been inching along for the past few weeks as EUR/USD wilts. The bigger moves in the report are in JPY and CHF as bets against both ramp up in a sign of better risk sentiment. However that's tough to square given the large bets against commodity FX. On the whole, it's a market that's continuing to pile into dollars and the overcrowded positioning is probably the best explanation of why the market reversed on the details of the GDP report.