Commodities:
A second week of broad and accelerated risk aversion and rising volatility saw all sectors and most contracts covered in this update being exposed to net selling. This occurred during a reporting week that, despite a weaker dollar, saw the Bloomberg Commodities Index drop 1.4% as hedge funds lowered their overall exposure amid rising volatility and after Trump’s on-again, off-again tariff strategy caused a great deal of confusion and, in some sectors, demand concerns. Not least the agriculture sector, where China’s counter tariff move helped trigger the biggest one-week selling of key crops in two years.
Overall, the combined net long across the 27 major futures contracts tracked in this update was cut by 410k contracts to 1.07 million, the lowest since December, with all sectors seeing net selling led by the agriculture sector (333k contracts), with the bulk of the reduction seen across the soy and grains sector.
On an individual level, only WTI and natural gas saw notable buying, with buyers covering short positions in the US crude contract following a slump to a 15-year low in the previous week, while natural gas continues to benefit from rising demand, both domestically in the US and towards exports via LNG. As mentioned, selling was broad, and apart from the agriculture sector being led by Brent after hedge funds cut bullish bets by the most since July as prices temporarily dropped to levels last seen in 2021. The gasoil (diesel) contract flipped to a net short while gold and copper both witnessed net selling despite continued price strength, potentially signalling lower risk appetite in response to rising volatility.
Forex:
In the forex market, speculators sold USD for a seventh consecutive week, reducing the dollar long versus eight IMM futures by 37% to USD 9.6 billion, the lowest since October, and down 72% from the mid-January peak that was reached just ahead of Trump’s combatant inauguration speech, which set the tone for the new US administration. Buyers concentrated their focus on three major currencies, led by the JPY, which saw the net long jump 39% to a fresh record high at 134k contracts, or USD 11.3 billion equivalent. The technical breakout in EURUSD helped reduce the net short by 60% to 10k contracts (USD 2.1 billion), while the GBP long reached 18.6k contracts (USD 1.1 billion). Partly offsetting these were small amounts of net selling of CAD, AUD, NZD, and MXN.
