further liquidation of stale euro/dollar long positions," he said. Speculators have built up the biggest bullish position in the euro in over two years, according to weekly data from the Commodity Futures Trading Commission. At $23 billion, it has almost trebled in six months. But investors are already banking on the European Central Bank having more scope to raise interest rates than the Fed, which might prompt some paring back of those bullish bets. Money markets are pricing in a roughly 80% chance that the Fed will keep rates on hold at its next meeting in June, and expect at least a couple of rate cuts to follow before the end of the year. Rising expectations that the Fed will begin cutting rates later this year have been driven by recent stress in the banking sector following the collapse of Silicon Valley Bank in March.
"The bar is high for a Fed response to data surprises in either direction," said Vishnu Varathan, head of economics and strategy at Mizuho Bank. "Having concluded 500 bps of rate hikes and anticipating some credit tightening from a shake-down amongst regional banks, the Fed is unlikely to tighten further on merely 'sticky' inflation, instead requiring re-acceleration of inflation." Elsewhere, the Japanese yen was steady against the dollar at 135.25 and against the euro at 148.155, while the Australian dollar eased 0.1% to $0.6755. Bank of Japan (BOJ) Governor Kazuo Ueda said on Wednesday the central bank will debate an exit strategy from ultra-loose monetary policy and communicate it to the public once stable, sustained achievement of its inflation target approaches. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates Euro bulls go all-in ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Rae Wee in Singapore; Editing by Edwina Gibbs, Simon Cameron-Moore and Sharon Singleton)
