Daily Forex Brief | Warning signs flashing for euro-bears

The Daily Forex Brief is written by FxPro's team in the City of London. Visit fxpro.com for more news, FX commentaries, Business Center TV, real-time feeds, calculators and tools.
Daily Forex Brief London: Tuesday 18th October 2011
Warning signs flashing for euro-bears Now becoming apparent is the degree to which investors and traders have been abandoning the euro over recent weeks. According to the CFTC, euro shorts have been substantial over the past month; only in the second quarter of last year were traders more negative. It also turns out that investors have been fleeing the single currency with similar vigour. Real money managers polled by BNY Mellon reported a huge reduction in euro-exposure in 2011, at a pace twice that of last year. Separate surveys undertaken by some of the major investment banks all confirm that foreign investors have significantly reduced European bond and equity investments over recent weeks. Interestingly, the IMF reports that sovereign wealth funds have also been lowering their euro-exposure, favouring the Japanese yen, the Aussie and the Canadian dollar. To add to the almost unanimous pessimism towards the euro, the overwhelming expectation of analysts polled by Bloomberg is for the euro to depreciate before year-end. To summarise then, the euro is gripped by a sovereign debt and banking crisis which very few believe Europe can resolve and traders and investors have supposedly fled the currency ? it is universally despised. So, it seems reasonable to ask the following: if there has been such an incredible volume of euro-selling, why is the single currency not much lower? At almost 1.39, it is only fractionally under its average for 2011 (1.4032). From a fundamental perspective, it is perfectly understandable to harbour deep suspicions over Europe's ability to resolve its difficulties. However, many other major advanced economies face very similar problems. Moreover, the consensus on the single currency is overwhelmingly negative. For the euro-bears, the danger signals are flashing ? if Europe does cobble together a decent package in the near term, there is enormous potential for a short-covering rally.
Also in today's Daily Forex Brief: China's slowdown triggers a new bout of risk aversion A very big week for Europe The dollar's relationship with data Read more...
The Daily Forex Brief is brought to you by:
Michael Derks Chief Strategist Simon Smith Chief Economist What do you think about the Daily Forex Brief? Email your views direct to the Insights team at insights@fxpro.com
Email: info@FxPro.com Web: www.FxPro.com Address: Karyatidon 1, Ypsonas 4180, Cyprus 24/5 International Customer Support Tel: +357 25 969 222 Fax:+357 25 969 269 Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. FxPro does not take into account your personal investment objectives or financial situation. FxPro makes no representation and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by an employee of FxPro, a third party or otherwise. This material has not been prepared in accordance with legal requirements promoting the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of FxPro. This communication must not be reproduced or further distributed without prior permission of FxPro. Risk Warning: CFDs, which are leveraged products, incur a high level of risk and can result in the loss of all your invested capital. Therefore, CFDs may not be suitable for all investors. You should not risk more than you are prepared to lose. Before deciding to trade, please ensure you understand the risks involved and take into account your level of experience. Seek independent advice if necessary. FxPro Financial Services Ltd is authorised and regulated by the CySEC (licence no. 078/07). To update your mailing preferences or to unsubscribe from future messages please follow the below instructions: - For current registered FxPro Trading Account users, login to FxPro Direct and choose subscriptions to view all mailing options. - If you do not have an FxPro Trading Account, please Click Here to unsubscribe.