Macroscope | The euro is no longer a sure bet if investors connect the dots in Europe

For currency traders, the euro is the closest thing there is to a one-way bet.

According to the latest data from the Commodities Futures Trading Commission, hedge funds and other speculative investors have built up the heaviest “long” positions – the purchase of a security in the expectation that its value will rise – on the euro on record, convinced that the euro zone economy will continue to perform well and, crucially, that the European Central Bank (ECB) will soon begin to tighten monetary policy, buoying the euro, which has already risen 16 per cent against the dollar over the past year.

The latest sign that Europe’s single currency area is more vulnerable than assumed was the publication on Tuesday of the results of a closely watched survey of economic sentiment in Germany produced by the country’s ZEW think tank. The indicator dipped into negative territory, having plummeted since February mainly due to concerns about the escalation in trade tensions between China and the US.