Yet more euro short-covering

28 Mar @ 10:26

The process of covering the mountain of record euro short positions which commenced in earnest during February has continued during the current month. That said, judging by the extent of short positions still being held by traders and hedge fund managers, we could yet see more of this type of activity in the weeks ahead if Europe remains as benign as it has done recently. Against the backdrop of yesterday’s bold declaration from Italian Prime Minister Mario Monti that Europe’s debt troubles were “almost over”, some of those remaining euro shorts have been minded to close out more of their positions this morning. The single currency has been the best performer of the major currencies so far today; for instance, EUR/GBP is 0.5% higher at just under 0.84 and EUR/AUD has cracked 1.28. Some of today’s sell-off in the pound is related to the usual month-end flows which are invariably adverse for sterling.