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Mar 19 - 02:55 PM

Morgan Stanley: Observing FX Positioning Ahead of FOMC Meeting

By eFXdata  —  Mar 19 - 01:50 PM

 Synopsis:

Ahead of the March FOMC decision, Morgan Stanley notes a tilt towards long USD positions in the market, as indicated by recent options and futures trading data. This positioning reflects a strategic anticipation of the Federal Reserve's upcoming policy announcement, with investors adjusting their currency exposures accordingly.

Key Points:

  • Shift in USD Positions: The latest options data from the week ending March 15 shows an increase in long USD positions, particularly against the backdrop of the DXY (Dollar Index). This shift is complemented by short positioning in GBP and CAD.
  • Futures Market Dynamics: Analysis of futures trading up to March 12 reveals a nuanced approach by investors, with additional shorts placed against JPY and GBP, contrasting with purchases of USD against NZD and CAD.
  • Investor Sentiment: The aggregation of options and futures data suggests a cautious but optimistic outlook towards the USD, marking it as a favorable position ahead of the FOMC meeting. Notably, CHF and NZD emerge as the most shorted currencies among tactical investors, whereas the futures market continues to show strong long positions in EUR and short positions in AUD and JPY.

Conclusion:

Morgan Stanley's examination of recent currency trading patterns underscores a cautious optimism among investors regarding the USD's trajectory, driven by expectations for the upcoming FOMC decision. This collective positioning reflects broader market sentiment and strategic positioning in anticipation of potential policy shifts by the Federal Reserve, highlighting the intricate dynamics at play in the FX markets as major central bank decisions loom.

Source:
Morgan Stanley Research/Market Commentary

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