(24 JUNE 2019)DAILY MARKET BRIEF 1:CHF rises as speculators cover short position

USD/CHF has completely collapsed last week as it fell as much as 2.60%, sliding from 1.0015 to 0.9755, following the Jerome Powell’s dovish performance during the last FOMC press conference. The fall in US interest rates has suppressed one of the last strong incentive for investors to hold the greenback, making it less expensive to short. Overall, safe havens assets have increased more than average against the buck, with the Swissie, yen and gold leading the pack. Excluding last January flash crash in the yen, USD/JPY fell to the lowest level since April 2018, while the yellow metal broke the $1,400 threshold to the upside - rising a 6-year high - which suggests that investors feel increasingly uneasy with the current economic situation and equity valuations.
Looking at speculators’ positioning, one notice that net short CHF positions continued to decrease last week, falling from 34% of total open interest to 26%. Similarly, net short JPY positions decreased to 13% from 26% a week ago.
The situation will remain tense until at least the G20 meeting that takes place on June 28-29. Investors hope that Trump and Xi will find an agreement that could put an end to the ongoing trade war between the two world’s largest economies. However, we believe that even in that case markets won’t return to normal as President Trump would bring its trade war to Europe. Be ready for a shaky summer.