Net short positioning on the euro increased to its largest since mid-March, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday, as speculators braced for the outcome of French elections over the weekend.
The first round of France's presidential election kicks off on Sunday, with polls suggesting the race will likely come down to a second-round duel between independent centrist Emmanuel Macron and Marine Le Pen, head of the anti-European Union and anti-immigrant National Front.Euro's net short contracts rose to 21,649 in the week ended April 18, from 18,956, data showed.
"Our base-case scenario for these elections is for a euro-friendly outcome, with the final race taking place between Macron and Le Pen," said Thomas Flury, a strategist at UBS' wealth management research in Switzerland. "However, we note that the odds of a euro-unfriendly outcome have risen," he added. Flury believes, however, that the euro's downside against the dollar remains well-protected as it has been in recent quarters." Speculators, meanwhile, lifted bullish bets on the US dollar for a second straight week.
The value of the dollar's net long position totaled $15.34 billion, up from $15.04 billion the previous week.
The dollar has held up against the yen this week in the face of weakening consumer spending, inflation and manufacturing data, although it struggled against European currencies. "The general resilience of the dollar can be attributed to the complacency of investors who believe that the recent disappointments in US data changes nothing about the outlook for US monetary policy," said Kathy Lien, managing director of FX strategy at BK Asset Management in New York.
CFTC data also showed that sterling net short contracts fell to their lowest since early March. Sterling has been well-supported this week after British Prime Minister Theresa May surprised markets by calling for an early parliamentary election in June. Investors viewed the election as easing political uncertainty and making it more likely that Britain could maintain some kind of preferential access to the single European market. The Reuters calculation for the aggregate US dollar position is derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars.
Comments
Comments are closed.