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Hedge funds position for stronger euro

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The prospect of softer US inflation bringing the outlook for monetary policy on both sides of the Atlantic closer in sync has pushed demand for options that pay out if the euro strengthens against the dollar over the next week to the highest seen since February, according to a report by Bloomberg.

The report cites unnamed Europe-based FX traders as revealing that hedge funds and interbank traders have also trimmed their euro shorts in the past few sessions as they position for a stronger euro.

According to data from the CFTC, hedge funds have now cut their shorts against them common currency by around 40% over the past month with the euro having strengthened against the dollar in each of the past four weeks, its longest winning streak in a year.

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