Risk/reward looks skewed to the upside for EUR heading into ECB – Morgan Stanley

In its latest FX positioning tracker, analysts at Morgan Stanley reports that the bias for the Euro has shifted to the bearish side in the past week, as markets turn cautious ahead of the ECB monetary policy decision due this Thursday.

Key Quotes:

"EUR was the most sold currency by non-commercial IMM accounts, bringing their short EUR positioning to the largest since March 2017. This was driven mainly by leveraged funds selling while asset managers were buyers. Global macro funds also sold EUR for the second week, while sentiment turned more bearish.

Large short EUR positioning suggests that risk/reward may be skewed to the upside for EUR going into the ECB meeting, particularly if the ECB strikes a bullish tone on inflation and downplays risks to growth. Overall, the most crowded trade remains the US dollar.”