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Speculative position adjustments in the currency futures were minimal in the immediate aftermath of the ECB’s December 3 meeting and US employment data the following day. However, activity dramatically increased in the days ahead of the FOMC meeting on December 16.

In most Commitment of Traders reports the gross position adjustment of 10k or more contracts is seen in three or four of the 16 gross currency positions we track.  In the latest report, which covers the five sessions before the conclusion of the FOMC meeting, there were seven gross currency position adjustments of more than 10k contracts.  Also, there were only two gross currency position adjustments of less than 5k contracts, which is also unusual.

The first development to note is that among the major currencies (euro, yen, sterling and Swiss franc), there was a short squeeze.  The speculative bears covered 21.5k gross short euro contracts (leaving 231.3k).  During the previous reporting period, only 9k gross short contracts were covered.