Risk sentiment climbed in the week ending December 6th according to the most recent futures report , and was reflective of the shift that was seen in major currencies leading up to the European summit last week.

In particular, Euro shorts were trimmed by an increase in long Euro positions – to the tune of $1.3 billion week over week.  The increase in long sentiment resulted in a minute reduction of recently accumulated short positions of about $17.4 billion – witnessed last week. Current net short positioning for the Euro still remains largely at $16 billion.  What is notable here is that the increase in long Euro holdings kept the overwhelming majority unfazed, maintaining a bearish overtone to the currency, which further translated into losses for the week.  The currency fell from a high of 1.3549 to as low 1.3359 during the report’s designated period.  Given the massive size of the current net short positioning, it’s likely that further longer term declines in the currency can be expected in the near term.

Notably, the euro currency wasn’t the only major to be bid a bit higher.  Commodity currencies were supported in the weekly period – with the Australian dollar seeing a major boost in bidding.  For the week, traders lifted the net long Aussie position to 29,824 contracts – or by over 130% – at just short of $3 billion.  The amazing increase in net long demand for the Australian currency coincides with the recent Reserve Bank of Australian rate cut decision and the psychological parity level with the US dollar.  The Aussie spot rate has since recovered from the 1.000 level to the US dollar, currently remaining above at 1.0038.

The market continues to remain widely short the British pound and Swiss franc – with CHF net short positioning widening in the past week ahead of the Swiss National Bank meeting this week.  Speculation has increased that policymakers are unwilling to lift the current EURCHF exchange rate floor set at 1.20.