Quantitative easing: all but dollar

Last week the quarterly earnings from the U.S. companies were released that improved the investors’ sentiment: S&P 500 added 0.8% since the start of the year. Optimism influenced the US currency too which made the US dollar index strengthen. As a result, its closest rival, euro, increased the futures shorts to 8bn dollars in a week, according to the CFTC data. For the last year, the short positions increased by 20bn which reflects the quantitative easing by ECB. Let us remind you that on Friday ECB announced possible further easing of its monetary policy. This week the Bank of Japan, New Zealand and Sweden meetings will take place and can result in the same moves. The Australian dollar, influenced by the US dollar strengthening, is held short too with the shorts volume of 3bn last week. We expect the further increase in short position volumes in case “aussie” weakens after the Bank of Australia meeting. The economies and currencies of New Zealand and Australia are closely related as Australia accounts for 30% of the New Zealand’s trade volume. What is more, the major Chinese market (accounting for 25% of Australian exports) is on a “burning platform” now.