Home Finance Column: ECB rates pledge spurs punchy hedge fund euro bets: McGeever

Column: ECB rates pledge spurs punchy hedge fund euro bets: McGeever

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The European Central Financial institution (ECB) headquarters is pictured in Frankfurt January 21, 2015. REUTERS/Kai Pfaffenbach/File Picture

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ORLANDO, Fla., June 6 (Reuters) – The European Central Financial institution seems dedicated to begin elevating rates of interest subsequent month, opening the door for hedge funds to load up on euros. And that’s precisely what they’re doing.

U.S. futures market knowledge exhibits speculators are holding their greatest net-long euro place in 12 weeks, and that Might marked funds’ second-most optimistic month-on-month change in positioning in practically two years.

The most recent Commodity Futures Buying and selling Fee report exhibits that funds elevated their net-long euro holdings by round $2 billion within the final week, accounting for two-thirds of a $3 billion fall within the broader long-dollar place in opposition to G10 currencies.

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Certainly, the $5 billion decline within the net-long greenback place in opposition to G10 currencies prior to now two weeks is completely as a result of a corresponding $5 billion soar in net-long euro positions.

Within the week to Might 31, CFTC funds elevated their net-long euro place to a three-month excessive of 52,272 contracts from the earlier week’s 38,930. Their guess on the euro appreciating is now value $7 billion, up from $5.2 billion per week earlier.

An extended place in an asset or safety is successfully a guess that it’s going to rise in worth, and a brief place is the other.



The shift in ECB expectations has been exceptional. Solely a month in the past, CFTC funds held a small net-short euro place, the euro slumped as little as $1.0350 in mid-Might, and discuss of parity with the greenback was rife.

However euro zone inflation continues to march greater – it hit a document 8.1% in Might – and the talk is now not whether or not the ECB will elevate charges in July for the primary time in over a decade, however by how a lot. learn extra


A number of ECB officers have floated the opportunity of a 50 basis-point transfer, and Deutsche Financial institution economists now count on one in every of two charge hikes within the third quarter to be a 50-bps hike, extra doubtless in September than July.

“We surprise why the ECB has not acted already,” Societe Generale economists wrote on Friday.

The ECB is predicted to stipulate on Thursday the trail towards a charge rise in July. Euro cash markets are pricing in 100 bps of charge hikes by October and 125 bps by year-end, and the euro has rebounded to a one-month excessive near $1.08.

International-exchange market individuals are paying heed to the ECB’s inflation-fighting discuss, and pushing to the again of thoughts the financial institution’s 2008 and 2011 charge hikes, which many analysts say have been main coverage errors.

For now, at the very least, hedge funds are on board too.

Associated columns:

Hedge funds place for U.S. progress stoop, charges peak (Might 23) learn extra

Yellen might face G7 stress on greenback (Might 18) learn extra

(The opinions expressed listed below are these of the writer, a columnist for Reuters)

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By Jamie McGeever in Orlando, Fla.
Graphics by Jamie McGeever and Saikat Chatterjee
Modifying by Matthew Lewis

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Opinions expressed are these of the writer. They don’t mirror the views of Reuters Information, which, below the Belief Rules, is dedicated to integrity, independence, and freedom from bias.

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