EUR: Positioning turns less constructive on inflation risk – Rabobank

Rabobank strategists Molly Schwartz and Jane Foley report that EUR net long positions have declined for a third consecutive week, driven by increased shorts. They stress that the Euro lacks safe-haven status and remains vulnerable as an energy importer in the current crisis, despite limited direct exposure to the Strait of Hormuz. Markets are now pricing in two ECB rate hikes over a one-year horizon on perceived inflation risks.

Net longs fall as shorts increase

"EUR net long positions have fallen for the third week in a row, driven by a jump in short positions."

"Since the EUR’s brief history is associated with crisis, it has no safe haven links."

"In addition, the Eurozone’s stance as an energy importer leaves the EUR more vulnerable in the current crisis even though very little of its energy is sourced through the Strait of Hormuz."

"The market is pricing in two ECB rate hikes on a 1-year view on the back of perceived inflation risks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)