Poll-Watching but Euro Move Looms

It's all about the polls as the UK election winds down and the market flirts with the mother of all comebacks. The pound was the top performer in light holiday trading on Monday as it rebounded from Friday's drubbing. CFTC positioning showed a big move in euro shorts. More on the latest drop in the euro below.

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Slippage in the euro ensued in eary Pacific trade on reports that Greece may forego the next bailout tranche in case of disagreement among its creditors if with regards to the latest debt relief program. Draghi's comments that "extraordinary" amount of monetary support was is still needed also is said to weigh on the single currency.

A series of campaign missteps left Theresa May vulnerable and voters began to flirt with the idea of voting for Labour. The Manchester attacked added to anxiety and what looked like a sure thing was suddenly in question as some polls on Friday showed her ahead only 6 points.

Those are the kinds of numbers that put her close enough to the margin of error to remind voters of Brexit polls. On Friday, the pound fell more than 150 pips in a broad rout that ensure polls over the final 10 days of the campaign will be market mover.

On Monday, the news was better for the Prime Minister with an ICM poll putting her ahead 46% to 32% against Labour. In response, cable rebounded 40 pips. The rebound may continue Tuesday as Chinese, US and UK traders return.

At the same time, the week ahead features some major economic data points and it begins with Japanese employment and retail sales then is followed with French GDP, German CPI and a critical US PCE report.

CFTC Commitments of Traders

EUR +65K vs +38K prior GBP -24K vs -33K prior JPY -52K vs -60K prior CHF -20K vs -21K prior CAD -99K vs -98K prior AUD +3K vs +6K prior NZD -9K vs -12K prior

The euro gradually had become the darling of the currency market. It's been a rapid shift from a large net short over the past month and the net long is now the most extreme since October 2013. The market loves a central bank that's bottomed out and an economy that's outperforming but we've been here before. Is this recovery for real?

Draghi was certainly optimistic in European Parliament on Monday as he continued to underscore the recovery. The ECB is trying to prepare the market for a taper signal in September while keeping the euro in check; it's a tough balancing act but if the data remains strong, a euro rise is inevitable.