COT report: Hedge funds’ positioning ahead of Calamity Wednesday – Saxo Bank MENA
Commodities
The latest reporting week ended just ahead of last Wednesday when Trump’s aggressive tariff announcement sent global markets, including commodities, into a major downward spiral on increased expectations that the president’s announcements would trigger a global recession, leading to major repricing of demand expectations.
In the days that followed, the Bloomberg Commodity Index, which tracks a basket of 24 major commodity futures, slumped 7.5%, almost wiping out the gains for the year. While the sector has still done a great deal better than the stock market, some significant losses, especially among the cyclical commodities like energy and industrial metals, have forced leveraged traders to minimize their exposures, in the short term exacerbating the declines, examples of which are a 17% decline in WTI crude oil, 14.5% in HG copper, and 13% in silver.
Weaker cyclical conditions due to the heightened risk of a recession and retaliatory measures may push the commodity complex lower in the short term before support emerges in response to a renewed focus on tightening market conditions, especially across key industrial metals, lower prices killing supply growth, a weaker dollar, and stimulus support, especially in China but potentially also Europe. In addition, it is also worth noting that periods of stagflation—that is, when inflation and unemployment rise and growth slows—historically have proven to be price supportive for commodities, not least gold.
With all these developments occurring after the latest COT reporting week, the latest update highlights which commodities were mostly exposed to the deleveraging move that followed.
Energy: A 21% jump in the Brent crude net long left this contract particularly exposed to recession fears and the OPEC+ decision to accelerate production from next month, and together with net buying of diesel and gasoline, the sector was left vulnerable to the selling onslaught that followed.
Metals: Ahead of silver’s 18% top-to-bottom collapse since last Wednesday, some long liquidation had taken place but not enough to prevent a major negative reaction to a collapse in the COMEX-London spread and heightened recession worries. Gold and copper had also seen some profit-taking, but elevated long positions left both metals exposed.
Forex
In the forex market, speculators chose to reduce bets ahead of Trump’s “Liberation Day,” which instead turned out to become a “Calamity Wednesday,” sending shockwaves across global markets, hurting the US dollar while sending stocks and bond yields sharply lower. Ahead of this historic event, the activity in the forex market across eight IMM forex futures resulted in the gross US dollar position versus eight IMM forex futures flipping back to a small net long of USD 1.2 billion.
Seven of the eight currencies tracked in this saw net selling, led by long liquidation in EUR, GBP, and CHF. Ahead of the end-of-week market turmoil, net long positions remained in the JPY at USD 10 billion equivalent, EUR (USD 7 billion), and GBP (USD 3 billion), while the largest net short positions were in the CAD (USD -9 billion) and CHF (USD -6 billion).
Last Updated on 5 days by PR News Desk
