According to data from the Commodity Futures Trading Commission as of May 27, institutional investors are becoming increasingly bearish on the U.S. dollar. The total short positions have risen to $47 billion, nearing the highest level since December 2023.
Increase in Short Positions
Short positions on the U.S. dollar have doubled in the past two months. Year-to-date, the dollar has dropped by 9.5%, marking its worst performance for this period in 30 years. Major currencies such as the euro, Swiss franc, and Japanese yen have appreciated by 10.1%, 10.3%, and 8.5% respectively against the dollar.
Macroeconomic Situation and Forecasts
The dollar has come under pressure after data indicated an increase in new unemployment claims in the U.S. last week. New nonfarm payroll figures are expected to show a decline to about 130,000 jobs. Karl Schamotta, chief market strategist at Corpay, noted that evidence of a cooling labor market is beginning to emerge, lowering expectations ahead of the upcoming jobs report.
Market Reaction to ECB Decision
The dollar slipped against the euro after the European Central Bank hinted at a pause in easing interest rates, having cut rates by 25 basis points as expected. The euro climbed 0.5% to $1.1473, a new six-week high against the dollar. Investors remain concerned about U.S. trade negotiations and the ongoing uncertainty in global markets.
In conclusion, the U.S. dollar faces significant pressure amid growing bearish sentiments among institutional investors and uncertainties in the global economy. Upcoming economic data may further influence its exchange rate.
