Citi: Forex investors sharply cut their bullish bets on the US dollar

The rapid pullback in bets on the Federal Reserve's interest rate cuts has prompted many categories of investors to reallocate funds. For the forex market, this does not seem to have much effect. Citi Forex's "Pain Index", which tracks the positions of active forex traders, shows that they have sharply trimmed their bullish bets on the US dollar, remaining largely neutral. At the same time, the US dollar has been moving higher, driven by its huge yield advantage over major currencies. This stance could be interpreted as far from certain that the FX market will really remain resilient in the face of the highest Fed Intrerest Rate since 2001. That view is that the unexpectedly sharp drop in retail sales released on Thursday is more indicative of the future than the inflation data released earlier this week. Amid rising geopolitical uncertainty and uncertainty over the US election in November, concerns about the dollar's outlook are also likely to grow.