Hedge funds expect a short on euro

Hedge funds are cutting long positions in the euro at the fastest pace in eight months as the resurgence of coronavirus infections in Europe reduces growth prospects.

Leverage funds cut net long euro positions by a total of 20,870 contracts in the two weeks ended October 13, according to the Futures and Options Futures Trading Commission.

The renewed influx of infections has undermined the euro’s positive momentum, as traders speculate that politicians can ease back support for growth. European Central Bank President Christine Lagarde has warned that service delays are particularly worrying, given that the sector accounts for three-quarters of the region’s jobs.

“The euro has a list of catalysts for sale,” said Hideki Shibata, a senior strategist for interest rates and currencies at the Tokyo Research Institute in Tokay. “Traffic restrictions will do great damage to the economy. Speculation of additional monetary easing is rising and bond yields have plummeted. “

The common European currency fell about 2.5% from its rise to $ 1, 2011, the highest in more than two years, in early September. It traded around $ 1.17 on Monday, and analysts in a Bloomberg study see it reach $ 1.18 in the fourth quarter.

Source: Bloomberg Pro Terminal

Chart: Used with permission from Bloomberg Finance L.P.