«Bullish» sentiment towards the dollar is weakening

Amid the slowdown in economic growth in the United States, investor sentiment towards the dollar has changed for the first time in the last six weeks. Analysts' data indicate an increase in the number of net short positions against the dollar, even despite the continuation of numerous bets by hedge funds with leverage.

According to the US Commodity Futures Trading Commission, as of May 21, the volume of net short positions in the dollar amounted to $5.36 billion, while a week earlier net long positions amounted to $2.02 billion.

The decrease in inflation in the United States, recorded in April along with a decrease in retail sales, reinforced expectations of a reduction in the Federal Reserve's interest rate. The next data on personal consumption expenditures (PCE), expected by Friday, will be an important factor for the market, as this is a key indicator of inflation for the Fed.

Analysts express confidence that, depending on economic indicators, the market may adjust to a strengthening of the «bearish» trend against the dollar, since it will be clear that the Fed is preparing to lower the rate.

In the period from May 14 to May 21, the dollar declined against almost all G10 currencies. Investors increased their net short positions on the dollar against the euro, reduced «bullish» bets against the pound, and increased their net long positions on the dollar against the yen.