Wed, 23rd August 2017

Anirudh Sethi Report


Archives of “canada” Tag

Speculative Position in USD ,CAD ,EURO ,YEN

In the CFTC reporting week ending August 1, speculators in the futures market continued to build long exposure in the dollar-bloc currencies. In the three sessions after the reporting period closed, the dollar-bloc currencies have traded heavily. 

The bulls added 12.5k contracts to lift the gross long Canadian dollar position to 82.9k contracts.  It is the largest such position in nearly five years.  The bears covered 1.5k contracts to leave a gross short position of 42.2k contracts.  This resulted in a 50% increase in the net long position to 40.6k contracts from 26.6k.  
The bulls topped up their gross long Australian dollar position by adding 4.5k contracts, lifting it to 85.3k contracts.  The gross short position edged ever so slightly higher.  The net long position increased to 60.7k contracts and was the seventh consecutive weekly increase.  Speculators were mostly inactive in the New Zealand dollar, but the net  long position edged up to 34.9k contracts.  
The other significant (more than 10k contract) gross position adjustment was in sterling. Speculators added 10k contracts to the gross short position, lifting it to 88.3k contracts.  In the prior reporting week, the gross shorts rose by 11k contracts.  The bulls were not discouraged and added 6.7k contracts to the gross long position.  It stood at 58.9k contracts.  
Although the speculative position adjustment in the euro and yen were modest at best, there has been a change.  The bulls cut gross long euro positions for the second consecutive week.  The bears covered almost 1k previously sold yen contracts, but the gross short position was reduced for the second consecutive week.  However, the overall negative dollar bias remained evident.  Of the eight currency futures we track, the gross longs were increased in six.  
On the other hand, the bull who have dominated the 10-year Treasury note futures retreated. They liquidated 23.1k contracts, leaving a gross long position of 850.6k contracts.  The bears were emboldened and added 46.7k contracts to the gross short position, raising it 639.7k contracts.  The net long position fell by a quarter to 210.9k contracts.  
The bulls were reinvigorated.  They added 58.9k contracts to the gross long position, increasing it to 717.8k contracts.  The bears covered 4.6k contracts, leaving a gross short position of 231.7k contracts.  As a result, the net long position increased by 63.4k contracts to 486.8k contracts.  

One Way Or Another – Venezuela Will Send Oil Prices Up

In a desperate bid to survive its economic meltdown, Venezuela is lobbying other OPEC members to agree to steeper oil production cuts, a move that would likely lead to higher oil prices.

Venezuelan officials have reached out to their counterparts in Iran, Russia and Saudi Arabia to press them on more collective action, according to Argus Media. If there was enough interest, the next step would be an “extraordinary meeting,” which would weigh the option of cutting deeper.

 The rumors about deeper OPEC cuts have been floating around since June, when oil prices collapsed into the low-$40s. The markets have grown deeply pessimistic about the health of the oil market, and doubt the OPEC cuts will balance the market by the end of the compliance period in March 2018.

But the behind-the-scenes effort from Venezuelan officials is notable, if only because the South American OPEC members was one of the earliest and most aggressive supporters of the original deal to reduce output. In 2016, for months the more powerful members of the cartel rebuffed Venezuelan pleas, but in the end they agreed to reductions in November after oil prices continued to wallow below $50 per barrel.

The deal pushed prices above $50 for a period of time, but after six months of restraint, the market is back in sub-$50 territory.

However, the urgency for higher prices is more acute now for Venezuela. Protests have spread nationwide in the South American nation as the economy contracts at a torrid rate. Violence is becoming more widespread, and the nation is suffering from political gridlock and economic and social disaster.

Over the weekend, the opposition organized an informal referendum, which attracted more than 7 million votes, to oppose anti-democratic moves by the government. The vote demonstrated widespread anger and opposition towards the government’s upcoming effort to consolidate power in a July 30 vote to rewrite the constitution, a move that would weaken competing institutions like the National Assembly. The referendum opposing the July 30 vote was not recognized by the government, but it was a show of force for the opposition.

There is no way out of the downward economic spiral for Venezuela in the short run without significantly higher oil prices.

G-20 declaration exposes tensions with Trump

The Group of 20 leaders on Saturday came off looking cohesive as they bridged major differences that most of them have with U.S. President Donald Trump.

This is reflected in their joint statement, especially in sections regarding trade and global warming.

 On trade, the leaders agreed they would “fight protectionism including all unfair trade practices and recognize the role of legitimate trade defense instruments in this regard.”

The declaration also mentions efforts to eliminate a global steel supply glut.

That the leaders were able to agree on this issue was something of a surprise. Immediately before the summit, the U.S. suggested that it might raise tariffs on steel products. European Commission President Jean-Claude Juncker countered immediately. “Within a few days — we won’t need two months — we could react with countermeasures,” he said.

Higher U.S. tariffs on steel would also affect Japan, which only days ago broadly agreed with Europe on an economic partnership agreement. So it was no surprise when Japanese Prime Minister Shinzo Abe told his peers no country would benefit from protectionism.

China now 2nd largest investor country after US, says UN

China Inc.’s global acquisition spree propelled the country into the second spot in outbound investment in 2016, the U.N. said Thursday.

Foreign direct investment by China soared 44% in 2016 to a record $183 billion, the second largest after the U.S.’s $299 billion, according to data released Thursday by the U.N. Conference on Trade and Development.

 China was in the fifth place in 2015 and its rise to the second spot was for the first time ever.

“In recent years, developing economies are increasingly becoming investor economies despite their level of development,” said Astrit Sulstarova, UNCTAD’s data analysis section chief.

The upsurge reflects China Inc.’s voracious appetite for global mergers and acquisitions, the Geneva-based body said in its annual World Investment Report 2017. Anbang Insurance Group alone reportedly purchased $6 billion in assets abroad in 2016.

Last year also saw China National Chemical take over Syngenta, a Swiss chemical giant.

China’s spending spree also reflected individuals’ purchases of real estate properties in developed countries such as Australia, the U.K. and the U.S., the UNCTAD noted.

An Update for Forex ,Crude Oil -Positions

It was feast or famine in the adjustment of speculative positions in the currency futures market during the CFTC reporting period ending May 2. Speculators either made large adjustments or very small adjustments, and little in between.  
Speculators covered 17.7k previously sold euro contracts to reduce the gross short position 161.1k contracts. It has been reduced by around 46k contracts over the last few weeks.  The gross long position edged 1.6k contracts higher to 159.4k.  It has fallen by around 16k contracts in the past few weeks.  The net position was reduced primarily due to buying related to short-covering and now net short by 1.7k contracts, the least since June 2014.
Speculators liquidated 11.0k long yen futures contracts to 37.5k contracts.  The gross short speculative position fell to 68.0 contracts, a 7.4k decline.  The result was the net short yen position increased to 30.5k contracts from 26.9k. 
The Canadian dollar was very much in play.  Some bulls tried picking a bottom and added 14k contracts to the gross long position, which stood at 66.6k contracts at the end of the statement period.  The bears were still in control.  They added another 19.1k contracts to the gross short position.  It stands at 114.3k contracts, which is the most since at least 1993.  
It has been a rapid accumulation of gross short contracts.  It has doubled, for example, since the end of March.  The gross short position has increased for three weeks in a row and eight of the last nine.  Some of these late shorts are in weak hands.  The key reversal posted in spot before the weekend warns of their vulnerability.  This vulnerability is best understood by looking at gross positions, not net.  
Outside of a 9.6k contract reduction of the gross short sterling position, speculators did not make any other gross position adjustments of more than 5k contracts.  Nearly a third of the 16 gross positions we track were adjusted by less than one thousand contracts.  
Overall, speculators showed a penchant for reducing the gross short currency exposure.  The only exceptions were Mexican pesos and Canadian dollars.  There did not appear to be a clear pattern among the gross long position adjustments.  
The bears in the oil market pressed their advantage while some bulls bought into the weakness.  The bears added 50.6k contracts to their gross short position, lifting it to 257.5k contracts, the largest of the year.  Almost 12k contracts were added to the gross long position.  It stands at 630.7k contracts. The net long position fell by 38.7k contracts to 373.1k.  
The bears in the 10-year Treasury note futures tried picking a top ahead of the FOMC meeting and US jobs data.  They added 38.7k contracts so the gross short position was lifted to 6506k contracts.  The longs stayed pat, adding a mere 4k contracts to round up the gross long position to 830.4k contracts.  The net long position fell to a little less than 180k contracts from 214.6k.

WSJ: Investors in Asia turned cautious Friday ahead of a G20

Huh, the Wall Street Journal got that right …

A quiet one … I shoulda let them write the Wrap
Meeting of finance chiefs from the Group of 20
Traders are monitoring how China and Japan will react to pressure from Mr. Mnuchin to strengthen their currencies against the U.S. dollar, said Khoon Goh, head of research for Asia at ANZ. “There is a lot of interest if there will be any material changes out of the G-20,” he said.
US Treasury Sec. Mnuchin is expected to urge China, Japan, Germany and other G-20 members to keep their promise to not use their exchange rates for competitive gains
Link to the Journal, may be gated, but you get the gist.

Tony Blair leaves door open to second referendum on EU membership

Former British prime minister Tony Blair has hinted at his support to have a second referendum if a “significant part” of those who voted for Brexit change their mind.

Speaking to launch his campaign to “persuade” people not to leave the EU, Mr Blair said:

If a significant part of that 52 per cent show real change of mind, however you measure it, we should have the opportunity to reconsider the decision.

Whether you do it through another referendum, or another method, that’s a second order question.

The former leader of the Labour party also invoked the “propensity for revolt” seen across the developed to call on pro-EU supporters to convince people who “voted without knowledge of the true terms of Brexit”.

Mr Blair said he wanted to “strengthen the hand of the MPs who are with us and let those against know they have serious opposition to Brexit At Any Cost”, adding:

This is not the time for retreat, indifference or despair; but the time to rise up in defence of what we believe – calmly, patiently, winning the argument by the force of argument; but without fear and with the conviction we act in the true interests of Britain.

Trump Blocked From Addressing UK Parliament For “Racism And Sexism”

In a striking announcement by John Bercow, the speaker of the British House of Commons, Donald Trump is to be barred from giving a historic address in Westminster Hall, the British Parliament’s grandest and most prestigious hall.

Bercow announced he would not give the US President permission to speak in the 11th Century Westminster Hall when he makes a state visit. John Bercow slammed Trump for “racism and sexism”, his undermining of judges and his migrant ban. Bercow’s intervention is unusual because Speakers are expected to remain above Parliament’s partisan fray.

US court refuses to immediately restore Trump travel ban

A U.S. appeal court late on Saturday denied a request from the U.S. Department of Justice to immediately restore a immigration order from President Donald Trump barring citizens from seven mainly Muslim countries and temporarily banning refugees.

The court ruling dealt a further setback to Trump, who has denounced the judge in the state of Washington who blocked his executive order on Friday. In tweets and comments to reporters, the president has insisted he will get the ban reinstated.

 Trump says the temporary immigration restrictions on citizens from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen, and on all refugees, are necessary to protect the United States from Islamist militants. Critics say they are unjustified and discriminatory.

The judge’s order and the appeal ruling have created what may be a short-lived opportunity for travelers from the seven affected countries to get into the United States while the legal uncertainty continues.

In a brief order, the appeals court said the government’s request for an immediate administrative stay on the Washington judge’s decision had been denied. It was awaiting further submissions from Washington and Minnesota states on Sunday, and from the government on Monday.

The government’s appeal says the decision by judge James Robart in Washington poses an immediate harm to the public, thwarts enforcement of an executive order and “second-guesses the president’s national security judgment about the quantum of risk posed by the admission of certain classes of (non-citizens) and the best means of minimizing that risk”.

Trump denounced the “so-called” judge in a series of tweets on Saturday and told reporters: “We’ll win. For the safety of the country, we’ll win.”


The president’s Jan. 27 order has drawn criticism even from U.S. allies and created chaos for thousands of people who have, in some cases, spent years seeking asylum in the United States.

Iraqi Fuad Sharef, together with his wife and three children, spent two years obtaining U.S. visas, and had packed up to move to America last week, but were turned back to Iraq after a failed attempt to board a U.S.-bound flight from Cairo.

Trump lashes out at federal judge’s order to block travel ban

U.S. President Donald Trump criticized on Saturday the action of a federal judge in Seattle blocking Trump’s executive order banning anyone from seven Muslim-majority nations from entering the United States, calling it “ridiculous” and vowing to overturn it.

Trump said on Twitter, “The opinion of this so-called judge, which essentially takes law-enforcement away from our country, is ridiculous and will be overturned.”

 The bench order to lift the travel restriction was issued Friday. It suspends the executive order that Trump signed, banning travelers from the seven countries from entering the United States for 90 days, and refugees for 120 days, triggering a wave of protests across the United States.

Nearly 60,000 people had their U.S. visas cancelled due to the travel ban, the State Department said Friday.

The people will continue to be affected while the U.S. government reviews its screening process for admitting travelers from Syria, Yemen, Sudan, Somalia, Iraq, Iran and Libya and refugees from any country, the department said.