Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Trader Strategy
You can access both of our platforms from a single Saxo account.
COT Report: Mixed week seen ahead of Trump's tariff offensive
Ole Hansen
Head of Commodity Strategy
Key points:
- Our weekly Commitment of Traders update highlights futures positions and changes made by hedge funds across forex and commodities during the week ending Tuesday, 28 January 2025.
- We take a look at the reaction so far across markets to Trump's tariff announcements, noting that the stronger dollar has weighed on most commodities, except for the energy sector
- Following a week of mixed action, speculators maintained the largest dollar long position in six years
- Hedge funds turned net sellers of energy and industrial metals, while key agricultural commodities continued to attract fresh demand.
Markets react to Trump’s tariff announcement
Financial markets are trading relatively calmly in early Monday sessions after President Trump followed through on his threat to impose tariffs on the United States' biggest trading partners, including China, over the weekend. He also threatened tariffs against the EU. Two opinion pieces in The Wall Street Journal and Bloomberg criticized his move as unwise, given the low likelihood of Trump achieving his goal of making America great again. Retaliatory measures could equally harm the US economy, potentially boosting inflation and driving bond yields higher at a time when the US fiscal debt situation can ill afford increased funding costs.
The dollar surged on the news, causing the Mexican peso to tumble by 3% and the Canadian dollar to hit its lowest level since 2003, while the euro approached parity. Eventually, all three currencies found some support, possibly due to speculation that the tariffs are part of Trump's negotiation tactics and could be short-lived. However, JP Morgan warns that if the tariffs are prolonged, they could push both Canada and Mexico onto a recessionary path.
Commodities had a mixed reaction to the announcement. The stronger dollar generally weighed on prices, but the energy sector received a boost following a sudden price spike on 4.5 million barrels of daily crude imports from Canada and Mexico. US refiners in the Midwest, which rely on Canadian oil, may face higher feedstock costs due to the tariffs, potentially impacting the US farming heartland by driving up food costs through increased fuel and logistics expenses.
Gold received a fresh safe-haven bid, but with the dollar rising simultaneously, the higher gold prices have mostly been observed across other gold crosses, where several fresh record highs have been recorded. Industrial metals and key crops are trading lower as we await a counter-response from China, the world's top consumer of industrial metals and largest importer of corn and soybeans.
Forex:
In the forex market, the aggregate dollar long position against eight IMM forex futures remained unchanged for the week, holding near a six-year high at USD 33.8 billion. Selling pressure on GBP, EUR, and CHF was balanced by demand for JPY, NZD, CAD, and MXN. The Japanese yen position returned to neutral following while the MXN position flipped back to a net long. Overall, this was a week that saw the dollar index trade mostly flat, with minor movements across the major currencies—except for a recovering sterling, which gained 1% over the week.
Commodities:
In commodities, hedge fund buying extended into a sixth week, primarily driven by continued demand across the agriculture sector, led by demand for corn, coffee and cattle, while selling emerged across the economic growth dependent sectors of energy and metals, both precious and industrial. Overall, the net long held by leveraged accounts across 27 major futures contracts reached a fresh 31-month high at 1.64 million contracts.
The table below shows plenty of year highs and lows, with the most notable being:
- Natural gas long at 260k contracts, highest since September 2021
- Soybeans long at 56k contracts, a 14-month high
- Corn long at 351k contracts, highest since May 2022
- Record live cattle long at 157,000 contracts
- Record cotton short at 54k following an unprecedented 40 weeks of net selling
The reporting week saw some nervousness start to creep in as Trump’s tariff threat gained some momentum and markets responded to the DeepSeek fallout across markets. Overall, the Bloomberg Commodity index fell 1.3 percent during the reporting period with losses being led by energy (-3.9%) and industrial metals (-3%), and only partly offset by strong gains across softs (+6.5%) and livestock (+5%). Precious metals traded mixed with a small gold gain being offset by silver weakness.
From an individual perspective, demand was concentrated in Brent crude, natural gas, and as mentioned several agriculture commodities, while sellers focused on WTI crude, Gas oil, wheat and cotton.
What is the Commitments of Traders report?
The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.
Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)
The main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's are:
- They are likely to have tight stops and no underlying exposure that is being hedged
- This makes them most reactive to changes in fundamental or technical price developments
- It provides views about major trends but also helps to decipher when a reversal is looming
Do note that this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy often sees this group of traders buy into strength and sell into weakness, meaning that they are often found holding the biggest long near the peak of a cycle or the biggest short position ahead of a through in the market.
Recent commodity articles:
1 Feb 2025: YouTube: Joining Kevin Muir and Patrick Ceresna on The Market Huddle podcast
31 Jan 2025: Commodities weekly: Strong January led by precious metals
29 Jan 2025: Agriculture sector rally led by coffee, corn and cattle
27 Jan 2025: COT Report: Commodity buying extends to fourth week
24 Jan 2025: Commodities weekly: Trump tariff threats and energy agenda in focus
23 Jan 2025: Crude oil weakens amid tariff uncertainty
22 Jan 2025: Gold and silver see fresh gains as Trump 2.0 era begins
20 Jan 2025: COT Report: Elevated commodities longs face short-term risks
17 Jan 2025: Commodities weekly: Strong January rally pauses ahead of Trump
15 Jan 2025: Q1 2025 Commodity outlook: A bumpy road ahead calls for diversification
14 Jan 2025: COT Report: Hedge fund long jumps to 17-month high led by crude, gas and metals
13 Jan 2025: Crude oil rally amid winter demand and Russian sanctions
10 Jan 2025: Commodities weekly: Strong start to the year led by energy and metals
7 Jan 2025: COT Report: Managed money's year-end positioning in forex and commodities
20 Dec 2024: Silver's resurgence in 2024: A precious metal with an industrial edge
17 Dec 2024: Investors cash in: Gold and silver see year-end profit taking
17 Dec 2024: Podcast: A wild ride in 2025 awaits
16 Dec 2024: COT Report: Agriculture in demand; Traders lift bets against the euro
13 Dec 2024: Commodities weekly: The forward curve and impact on returns
10 Dec 2024: Brazil's coffee crisis pushes Arabica to all-time high
9 Dec 2024: COT Report: Speculators bought crude and gold: euro shorts reach 4-year peak
6 Dec 2024: Commodities weekly: Copper rises on China optimism; OPEC delay signals crude weakness
3 Dec 2024: COT: Mixed week in commodities as dollar buying continued
Podcasts:
3 Feb 2025: If new Trump tariffs stick, markets have only just begun to react
31 Jan 2025: Does the market think Trump is bluffing?
29 Jan 2025: The DeepSeek winners emerge
27 Jan 2025: DeepSeeking missile strikes global markets
24 Jan 2025: Four days in, Trump continues to dominate headlines, but ...
20 Jan 2025: Trump 2.0 swings into action
17 Jan 2025: Brace for Monday, as a new era begins
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: The ride just got rougher
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
China Outlook: The choice between retaliation or de-escalation
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
Commodity Outlook: A bumpy road ahead calls for diversification
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX outlook: Tariffs drive USD strength, until...?
John J. Hardy
Global Head of Trader Strategy
-
Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...