The euro has shown marked resilience in the face of constant onslaughts emanating from the up and down yo-yo of the Greek economic crisis. Higher levels of volatility could have been expected as daily news of developments shifted sentiment continually from pessimism to optimism.
The latest report from the Commodity Futures Trading Commission (CFTC) on speculative positioning goes a long way to explaining the absence of volatility in the value of the euro (EUR).
Despite the resounding “no” result that came out of the recent Greek referendum which had been expected to depress the euro, the currency remained stable, actually strengthening against the USD the day after the result had been announced.
The CFTC report indicates that the EURUSD, +0.0128% was the beneficiary of a reduction in short positions - driven by speculator sentiment that the value of an asset will fall - which kept euro values stable despite the uncertainties around the Greek situation.
Data about the speculative positioning on U.S. exchanges is released every Friday by the Commodities Futures Trading Commission. The latest report, which covered the period between the 1st and the 7th July, revealed that bets against the euro decreased by $300 million to $13.7 billion which is substantially less than the $19.5 billion which was reported on the 12th of June.
Reading the CFTC data over the last 6 months reveals that speculators have been reducing their bets against the euro since mid-March when the currency recorded its lowest values against the USD. The pace of the reduction in short positions started to accelerate after the June 3 meeting of the European Central Bank where bank president Mario Draghi said that the bank would not curtail its program of asset purchases ahead of its planned end date.
The stability of the euro has confounded many currency strategists, the majority of whom were forecasting that a “no” vote in the referendum would weaken the euro.
The stability is also a very good indication that markets have started to discount the continually changing Greek news of last minute deals followed by a Greek refusals to accept eurozone conditions for a further bailout.
An analysis of the CFTC data by Goldman was published which expressed the view that, “As a result, speculative euro shorts are modest by historical standards, especially when compared to the period around the 2011 Greek referendum.”
While the euro traded slightly lower against the USD on Monday in a range between $1.1042 and $1.1157, it remained well within its value range for the past month.
MT4 Chart: EUR/USD