MUFG’s Lee Hardman highlights that the Euro (EUR) remains near recent lows around 1.1200 against the Dollar, pressured by fiscal and political concerns in the Euro area, especially France. IMM data show leveraged funds rebuilding short Euro positions. With no clear positive catalyst identified, MUFG warns the Euro remains vulnerable to further weakness heading towards year-end.

Euro pressured by politics and positioning

“The euro continues to trade close to recent lows at just above the 1.1200-level against the US dollar.”

“Heightened investor concerns over the fiscal and political risks in the euro area continue to weigh heavily on the euro and government bonds in the region particularly in France.”

“The latest IMM report provided confirmation that leveraged funds have been rebuilding short euro positions over the last couple of weeks to 6th October although they still below the year-to-date highs from the end of July.”

“At the current juncture, there is no obvious positive catalyst that could trigger a reversal of bearish sentiment towards the euro leaving it vulnerable to further weakness heading into year-end.”