By that, it says, investors remain structurally positioned for deflation and inequality and remain unconcerned about the prospect of inflation.
These views can also be carved up into those positions likely to benefit from a strong dollar and those that won’t. Relative to history, those fund managers surveyed by the bank remain very long strong dollar plays like the discretionary sector, banks and real estate and firmly underweight weak dollar plays, in particular the euro and emerging markets.
Heading into the ECB announcement yesterday that started the procession of what are expected to be incredibly important decisions/data points over the next few weeks, the bank said the big consensus trades (based on fund manager surveys, flows and CFTC data) were, in order of magnitude: “very long Eurozone, US$, US tech, Japan, Discretionary…very short EM (esp LatAm), Commodities, Resources, Euro, 2-year Treasury, Utilities”.
Looking ahead to today’s data, the bank says markets will be focused on the US payrolls data an,d the average hourly earnings.
“Should payrolls disappoint we would expect big downward pressure on the crowded US dollar,” it said.
