FOREX: JPY Crosses - The JPY Underperformance Starts To Retrace In The Crosses

FX positioning shifts, per CFTC, were once again mixed in the week ending the 26th of August (last Tuesday), see the table below. 

• On the leveraged side, there was very little net change in the majors, with modest JPY, EUR selling, but some GBP buying. AUD and NZD also saw some buying in the leveraged space, with NZD almost back to a net long position. The other standout in this space was the addition of net longs for MXN.
• On the asset manager side, longs in EUR and JPY were added to, but mostly net selling was evident elsewhere. GBP and AUD shorts were added to, likewise for CAD.   
• These mixed trends reflect broader USD moves, where aggregate indices remain within recent ranges. Asset managers prefer JPY and EUR over the USD though, which has been a consistent theme for a while. AUD shorts may also be challenged if we can push above 0.6600. 

Table 1: CFTC Positioning Change & Outright Position By Major Currency 

Source: Bloomberg Finance L.P./MNI 

The S&P(ESU5) overnight range was 6455.50 - 6513.00, SPX closed -0.64%, Asia is currently trading around 6489, +0.25%. The S&P ended the week poorly after earlier shrugging off multiple headwinds, a combination of the PCE print & month-end flows the likely culprits. The S&P remains in a bullish uptrend, and for the moment is ignoring all headwinds. Month-End selling saw it pullback as we head into September which traditionally is the worst month for US Equity performance, will stocks continue to ignore seasonality like it did in August? This morning futures have opened higher, E-minis +0.25%, NQU5 +0.35%. Market will be eyeing NFP on Friday.

• (Bloomberg) - “The soaring S&P 500 may yield to caution in September — historically the worst month for returns — with a key US jobs report, inflation reading and the Fed’s rate decision on the agenda. Some of Wall Street’s biggest optimists worry the eerie calm is sending a contrarian signal in the face of seasonal weakness.”
• Holger Zschaepitz on X: "This chart from Goldman Sachs highlights the overwhelming dominance of the US. Since the peak before the global financial crisis, US corporate profits have surged by 166% – far outpacing other regions. By contrast, the eurozone has barely moved, with corporate profits up only 8%, a particularly stark underperformance." See Chart Below.
• Lance Roberts on X: “August defied historical return statistics by putting in a roughly 2.5% return. Will September, historically the weakest month of the year, do the same?" 

Fig 1: US Corporate Dominance

Source: MNI - Market News/@Schuldensuehner

The early bias for JGB futures is softer, the Sep future was last 137.42, -.12 versus settlement levels. Recent lows rest at 137.22, which will be a downside focus point. The bias in US futures has been to track lower in early Monday dealings, although today so there is no cash trading. 

• The other weight for futures may be from slightly better than expected capex data, which was led by strong rises in manufacturing capex for Q2. This paints a resilient backdrop for this part of growth. However, JPY is little changed so far today, so it isn't impacting FX markets.
• The final outcome for the August print of the S&P manufacturing PMI has crossed. It came in at 49.7, against a preliminary August read of 49.9.
• In the cash JGB space, yields are higher across the benchmarks, with the back end leading a touch. The 10yr is edging back up towards 1.62%. The 30yr is around 3.20%. The 2/30s JGB curve is little changed though at +232bps.
• Swap rates are biased higher as well, the 10yr last close to 1.425%.