Net long positioning on the euro rose to its highest in more than three years, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday. Euro net long contracts for the week ended May 16 were at 37,604, the largest since March 2014.
Recent improvements in euro zone inflation, key sentiment gauges and the overall solid performance in the region's economy in the first quarter have raised expectations the European Central Bank will adjust its language at its next Governing Council meeting in June to reflect the improved backdrop, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. For the month of May so far, the euro has risen nearly 3 percent, on track for its best monthly performance since March 2016. Net long positions on the US dollar, meanwhile, increased for the first time in four weeks, data showed.
The value of the dollar's net long position rose to $13.5 billion in the week ended May 16, from $11.0 billion the previous week. Despite the increase in net long dollars this week, the greenback remains under pressure amid US political risk. The market remains focused on the political instability in Washington and growing uncertainty over the future of the US President Donald Trump's administration. "With those who were heavily optimistic over Trump's proposed fiscal policies now having second thoughts amid this uncertainty, the dollar could become a seller's best friend," said UK-based Lukman Otunuga, FXTM research analyst.
So far this month, the dollar index has been down nearly 2 percent. Japanese yen net shorts, meanwhile, rose to 60,008 contracts, the largest since the third week of March. The Reuters calculation for the aggregate US dollar position is derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars.