The ‘bets’ against the euro have soared back to 2020 levels

Driven by concern over the worsening economic situation in Europe and heightened geopolitical risk, investor bets against the euro are now trading at levels similar to October 2020, when the damage from the Covid pandemic had reached global proportions, according to the Bank of New York Mellon, reports the Bloomberg agency.

Unlike at the time, when those who held short positions in the euro were “burnt” as the currency regained ground along with the global economic recovery, investors in the current juncture “appear to be on the right track by increasing their short exposure to the common European currency.” , according to BNY executive Daniel Tenengauzer.

The extent of the “sorting,” according to BNY, is remarkable.

The data shows short positions in the euro against all major currencies, including the US dollar, the British pound (sterling) and the Swiss franc, Tenengeuzer notes.

The euro has sunk into 2022 amid a Russian invasion of Ukraine that has driven energy and food prices to record highs and heightened geopolitical concerns.

With drought added to the mix, inflation has soared. So, however, are concerns about the path of growth, making it difficult for the European Central Bank to raise interest rates at the pace of its other bonds worldwide and weakening investor “appetite” for assets on the European continent.

The euro went as high as 99.52 cents to the dollar in July, breaking the barrier of absolute 1-to-1 parity with the US currency for the first time in two decades. Although it has since rebounded slightly, it has so far hovered near $1, with investors expecting it to drop lower.

Of course, this is also due to the broad base of the dollar’s strength, as a mix of higher interest rates in the US and inflows from investors who view it as a safe haven has led currencies such as the British pound or the Japanese yen to even greater losses against the US currency. relative to the euro.