Mid-July sees the FX market navigating divergent central bank policies, a pending Fed rate decision, and shifting speculative bets across major pairs.
Central Bank Rates
The Bank of England kept its policy rate at 3.73% on July 8, while the Bank of Canada stands at 2.25% (July 9). The Fed Funds rate remains at 3.63% from the June 1 decision, and the ECB mirrors the BoC at 2.25% as of July 10. Japan’s ultra-low rate of 0.727% continues to widen the USD/JPY spread.
Major Pairs
- EUR/USD: ECB 2.25% vs Fed 3.63% gives modest dollar upside.
- GBP/USD: BoE 3.73% just above Fed 3.63% narrows spread, potential GBP strength.
- USD/JPY: BOJ 0.727% vs Fed 3.63% keeps yen under pressure.
- AUD/USD: AUD COT net short (-29k) suggests bearish bias despite commodity backdrop.
- CAD/USD: BoC 2.25% vs Fed 3.63% supports a firmer dollar.
- NZD/USD: NZD COT net short (-66k) adds to bearish pressure.
COT Positioning
Non-commercial traders are overwhelmingly short the Swiss franc (-38 k), British pound (-90 k), Japanese yen (-126 k), Australian dollar (-29 k), Canadian dollar (-173 k) and New Zealand dollar (-66 k). The euro shows a modest net long of 757 contracts, indicating relative bullish sentiment.
Emerging Markets & Risk Sentiment
The VIX sits at 15.03, down 5.1% on the day, signalling reduced market fear. Lower volatility may encourage risk-on flows into emerging-market currencies, but the still-elevated US yields and a solid dollar could temper any broad rally.