Short Euro bets hit their highest levels last year, however sentiment has done an about-face since then as bullish bets just hit their highest levels since July 2011, breaking into ‘net long’ territory. Conversely short positions on the yen broke through 5 year highs early December. Ultimately the Euro will not rally as that will kill their export led recovery, while it will similarly not fall given Draghi’s promise in July 2011 to “do whatever it takes” to save the Euro. Talk about rangebound.
Nick Kounis, ABN Amro, “The strength of the Euro – if sustained – is a threat to even their rather modest (growth) outlook. As such, we remain of the view that the European Central Bank will attempt to counter this strength. Verbal intervention has already begun, but if that does not work, interest rate cuts will come back on the table.”
Bob Savage, FX Concepts, “Being bullish on the Euro is a very dangerous game given the politics, the economics and the fragility of the banking system.