After the market reduced short USD positioning on May seasonality fears, the USD has come under renewed pressure this week, led by the moves in precious metals and commodities, and catalyzed further by the much weaker than expected NFP (266k vs 1m). Macro names net sold USD on the week, mostly vs. G10 but also vs. EM and precious metals.
The desk also saw some selective EM longs / carry trades via options, as well as topside gold and silver plays. This USD weakness, plus some hawkish comments from the ECB's Kazaks, prompted further EURUSD and EURCHF topside.
GBP was somewhat in focus given the Scottish parliamentary elections, but there has been limited and mixed participation in GBP.
GBP Stands Out Commodities remain bid, although there has been limited follow-through to commodity FX in G10. Both CAD and AUD trade lower on the day - the desk has seen a small buyer of AUD and seller of CAD. GBP flows are the standout with net flows showing, although some of this offset through EURGBP buyers.
Precious metals remain bid after XAU broke the 100-day moving average yesterday and as real yields settle - topside demand continues there.
ECB member Kazaks' comments (June decision to slow bond-buying is possible) pushed EUR higher and drew demand for topside shorter-dated options. Flows show the desk net bought EUR through London mostly via the crosses with flows more neutral against the USD. The topside demand for EURUSD has predominantly been macro names rolling existing positions higher, whilst interbank demand for gamma has kept lm-3m bid with the June ECB gap move +5bp at 33bp. Strength in EUR has encouraged further demand for topside EURCHF - 2m traded 4.375, the April highs.
ZAR underperforming in EMFX, but flows have been light on the desk's side. There has been better selling from hedge funds, but small sizes. Later on Friday we have the Moody's review of the sovereign. A negative outlook is assigned to the current Ba2 rating. Nothing is expected in terms of a rating change.
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