Bullish bets on USD highest since February 2022

Market reports
Thanim Islam
  • Hedge funds betting on change of fortune for USD
  • UK shop inflation falls to 17-month low
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USD weakened into the afternoon, with GBPUSD clawing out another fresh 2-month high, but the gains were unsustained by close of European trading, seeing GBP weaken and USD showing a minor recovery. GBPEUR hit a three-week high. New home sales showed a bigger than expected drop, with new sales falling by 5.6% and only 679,000 new homes sold, illustrating the high mortgage rates weighing on consumers.

Inflation in UK shops fell to a 17-month low to 4.3% in November, which will be welcome news for consumers as well as the Bank of England.


* Daily move - against G10 rates at 7:30am, 28.11.23

** Indicative rates - interbank rates at 7:30am, 28.11.23

Table - 2023-11-28T084616.771


  • None today

Our thoughts

Coming into month-end it seems that momentum behind the month-long weakness in USD, and strength in EUR is slowing, with the momentum behind GBP’s gains still relatively supported. Most of this is most likely down to the market pricing for rates cuts next year by the Bank of England being approximately 25 bps less than the rate cut expectations from the ECB and Fed. Governor Bailey commented again yesterday that its too early to consider rate cuts, and this seems the likely reason as to why GBP continues to benefit. The better risk sentiment environment is also helping the currency. Inflation numbers out on Thursday from the EU and US (Core PCE) will be in focus this week to gauge whether this USD weakness and EUR strength will continue rolling into December.

Chart of the day

The USD is currently on pace to have its worst performing month since November last year on a combination of markets increasing their expectation on rate cuts by the Fed next year, as well as better risk sentiment in the markets. However, momentum on these declines seems to be falling, and it something that the hedge fund community seem to have taken notice of. Bullish (positive) bets on USD are now at their highest since February 2022. As we come into month end, could we be on the cusp of a correction on the USD?

28112023 cotd
Source: Bloomberg Finance L.P.

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