**USD Net Short Positions Rise** For the first time in 22 weeks, GBP net positions have turned net short, mainly due to an increase in short positions. Meanwhile, JPY net long positions have fallen as short positions have risen. The FOMC kept the policy rate steady at 4.50%, which was expected by the market. The recent nonfarm payrolls report showed disappointing growth of just 73,000 jobs, along with a revision that cut 258,000 jobs from previous months. This has led the market to anticipate about two and a half rate cuts by the end of the year. The ECB also maintained its policy rate at 2.00%. In the Eurozone, unemployment dropped to 6.2%. A 25 basis point reduction is expected at the Bank of England meeting on August 7, which would lower the target rate to 4.00%. Japan’s nationwide CPI inflation for June was 3.3% year-over-year. A recent agreement between the US and Japan involves Japan promising to invest $550 billion in US industries and imposing a 15% tariff on Japanese exports to the US. As a result, JPY was the worst-performing G10 currency in July. We are observing a notable bearish shift in the US dollar, which should inform our strategy. The July nonfarm payrolls data was disappointing, showing only 73,000 jobs added and erasing over a quarter-million jobs from previous months. This reinforces the belief that the Federal Reserve might begin cutting rates, possibly as early as September. **Significant Shift in Sterling Positions** This week, we noticed a significant shift in sterling positions. After 22 weeks of holding net long positions, the market is now betting against the pound. This aligns with the anticipated Bank of England rate cut to 4.00% during the August 7 meeting. Given this situation, we should explore strategies that benefit from a declining dollar. Options that take advantage of further US economic weakness, such as buying puts on USD indices, appear promising. The market is positioned for about two and a half Fed rate cuts by the end of the year, and new data solidifying this trend could quicken the dollar’s decline. The euro presents a more complicated scenario. Although the European Central Bank is holding rates steady at 2.00% and unemployment has decreased to a robust 6.2%, traders are becoming more cautious and reducing bullish bets. This indicates that the euro may trade sideways against other currencies until a clearer trend emerges. The Japanese yen remains under significant pressure, as seen throughout July, when it was the worst-performing G10 currency. Despite June’s inflation rate of 3.3%, the new 15% US tariff on Japanese exports is a severe setback for Japan’s economy. Consequently, traders are increasing their short positions against the yen, expecting it to weaken further. This environment may make yen-funded carry trades appealing again, but with a strategy shift. Instead of using the weakened US dollar for funding longs, we could focus on more stable currencies. Positioning for a stronger euro against a weaker yen might be a solid strategy in the upcoming weeks. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now