Synopsis:

Morgan Stanley’s latest analysis of FX derivatives markets highlights a shift in investor sentiment across major currency pairs. Positioning signals show tactical investors leaning long EUR and GBP, while shedding exposure to CHF, CAD, and USD.

Key Points:

• Options Market Trends:

  • Investors reduced short SEK (vs EUR) positions, suggesting less bearishness on the Swedish krona.

  • Fresh long positions in AUD were added, signaling renewed optimism on the Aussie dollar.

  • Long CHF and CAD positions were trimmed, indicating declining confidence in traditional safe havens and resource-driven currencies.

• Futures Market Trends:

  • Short CAD and NZD positions were reduced, hinting at a softening of bearish views.

  • Long GBP and EUR positions were scaled back, though both currencies remain favored in broader positioning.

• Overall Positioning Biases:

  • Tactical investors are currently:

    • Long EUR and GBP

    • Short NOK (vs EUR) and USD (DXY)

  • In futures markets:

    • Long EUR and JPY

    • Short CHF and CAD

Conclusion:

Positioning data confirms the broad shift away from USD and into select European and high-beta currencies. Investors are expressing tactical EUR and GBP strength, while safe-haven flows into CHF are fading. The long JPY position also reflects a growing risk-off undertone amid global uncertainty.