Bank of America highlights that EUR positioning is broadly long, but notes Real Money investors are still underexposed, leaving room for further upside—particularly as equity flows and FX hedge adjustments shift in the euro’s favor.
Key Points:
EUR Positioning:
Markets are net long EUR, but Real Money investors (e.g., pensions, insurers, asset managers) still have EUR allocations below the post-2012 median.
EUR is overbought versus CHF, NZD, and CAD, but USD positioning is only mildly short, suggesting room for further USD downside if sentiment worsens.
Structural Tailwinds for EUR:
Equity rotation into Europe continues, with passive ETF flows playing a significant role.
European asset managers may begin raising hedge ratios on their US equity holdings—reversing a long-standing trend—which could translate into fresh EUR buying.
Conclusion:
While EUR positioning has grown more crowded in recent weeks, Real Money investors remain underweight, creating scope for additional EUR strength—especially if equity allocation trends and FX hedging flows materialize. The EUR remains supported by broadening diversification away from US assets and the relative attractiveness of European markets.
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