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EUR Bulls Dismiss Syrian Safe-Haven Move‏

ByDanske Markets
Published 09/02/2013, 07:03 AM
Updated 05/14/2017, 06:45 AM
EUR/USD
0.06%
GC
0.29%

The latest IMM data covers the week from 13 August to 20 August.

Speculators continued to add to long EUR positions in the week to 27 August - a week dominated by speculation of a US-led attack on Syria. The EUR/USD edged higher during this period, contrary to what is usually seen amid geopolitical tensions when USD would traditionally be in demand. Since positioning data were collected last Tuesdaythe EUR/USD has edged a little lower, suggesting that part of this build-up in EUR longs may have been reversed by now. Still, should President Obama receive congressional backing for a strike on the Assad regime, there should be potential for EUR/USD to head lower from here.

Gold, but not oil, benefited from the heightened Middle Eastern tensions last week in a classical safe-haven move. The substantial rally in oil on Tuesday-Wednesday, after IMM data cut-off, most likely led to more longs in the black gold as investors bought into the idea that a geopolitical risk premium in oil is becoming more entrenched in the market. Indeed, we expect this premium to stay around for a while and with potential to move higher if the US attacks.

Commodity currencies, such as notably the MXN, were shredded by speculators last week despite the moves higher in oil and gold prices. This illustrates the general aversion to currencies characterised by current account deficits in an environment with a Fed QE scale-back coming up, and the specific avoidance of anything with a touch of risk due to the Syrian issue.

To Read the Entire Report Please Click on the pdf File Below.

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