(Bloomberg) -- Bullish sentiment on the dollar is rapidly receding amid signs the US economy is cooling, with a group of investors holding a net short position for the first time in six weeks.

While leveraged funds still held bullish wagers on the greenback last week, they were dwarfed by increased net dollar shorts owned by asset managers, Commodity Futures Trading Commission data show. Combined they held a net short position with contracts worth $5.36 billion as of May 21. That compared with a net $2.02 billion long position a week earlier.

During this period, US monthly inflation data cooled for the first time in six months, while retail sales stagnated in April, boosting odds for Federal Reserve interest rate cuts. Investors will now turn their attention to personal consumption expenditures due Friday - the Fed’s favored inflation gauge - for any signals for the central bank to start easing policy.

“Positioning is going to be volatile in the near term, depending on the incoming US economic data,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia. “But I think ultimately the markets will turn more bearish on the US dollar as it becomes clear the FOMC will start cutting rates.”

The US currency weakened against almost all of its Group-of-10 peers between May 14 and May 21, leading to a decline of 0.4% in the Bloomberg Dollar Spot Index. In that week, investors boosted net dollar shorts against the euro while trimming bullish wagers against the pound, contributing to the shift in the overall dollar position. Net dollar longs against the yen still increased.

For investors to prepare for a new cyclical dollar downturn, the Fed has to “play ball,” said Rodrigo Catril, a senior foreign-exchange strategist at National Australia Bank Ltd. “Thus, the PCE this week will be important, so a soft or in-line number will keep Fed rate cut expectations this year alive.”

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