Thomas Lohnes
Institutional traders marked down their bets on a stronger euro to the lowest level in more than a year, according to positioning data from the Commodity Futures Trading Commission, as markets expect the European Central Bank to start cutting interest rates before the Federal Reserve.
Indeed, asset managers pushed back their long positions in the euro to the least since November 2022, the CFTC’s data for the week through Feb. 20 showed. This marks the fifth consecutive week in which net long euro positions have been cut back.
With inflation pressures cooling faster in the euro zone than in the U.S., money markets are pricing in a rate cut by the ECB in June, a month before the Fed.
Though inflation in the euro zone has retreated significantly since the October 2022 peak, ECB President Christine Lagarde needs more evidence that price growth is returning to the central bank’s target, as wage pressures remain robust, she said Monday in a prepared speech in Strasbourg, France.
In all, she believes “the current disinflationary process is expected to continue, but the Governing Council needs to be confident that it will lead us sustainably to our 2% target.”
The euro rose slightly against the U.S. dollar (EUR:USD) in recent weeks to change hands at 1.08469 at the time of writing, but it’s still down 1.7% so far this year. In the U.S., investors increasingly pushed back their rate-cut expectations this year, in a move that pulled up Treasury bond yields, and, thus, strengthened the U.S. dollar.
Related tickers: (FXE), (EUO), (FEZ), (ULE), (USD:EUR), (EZU), (HEZU).
