Net long positions on the US dollar fell sharply in the latest week to their lowest level since early October, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday. The dollar was a casualty of the euro's strength the past week after the victory of centrist candidate Emmanuel Macron in the first round of France's presidential race bolstered expectations the country would stay in the European Union and preserve the single currency.
The second round of France's presidential election will be held on Sunday, and Macron extended his lead in the polls over far-right rival Marine Le Pen on Friday. The US currency had also struggled as the Trump administration unveiled a one-page plan proposing deep tax cuts, many for businesses, that would make the federal deficit balloon if enacted, far short of comprehensive reforms both parties in Washington have sought for years.
Over the last week, the dollar index has fallen 1.4 percent, also pressured by a softer-than-expected first estimate of US gross domestic product. The value of the dollar's net long position slid to $12.70 billion in the week ended May 2, from $15.29 billion the previous week. This week's net long positioning in the dollar was a seven-month low. In other currencies, euro net shorts sank to 1,653 contracts, the lowest level since early May 2014, when speculators held net long positions on the currency.
Ahead of France's election on Sunday, the euro on Friday rose to its highest level since November 9, before ending flat on the day. "If Macron wins with a substantially larger portion of the vote than expected, he will receive a clearer mandate and greater backing to steer the country towards helping support and expand the EU/eurozone," said James Chen, head of research at Forex.com in Bedminster, New Jersey. Meanwhile, sentiment on sterling improved for a third straight week, with net shorts falling to 81,364 contracts.
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