Hedge funds ramp up bets against euro to highest level since 2020

Hedge funds’ bets against the euro have reached their highest level since March 2020 amid political turmoil in France, according to U.S. Commodity Futures Trading Commission data compiled by Bloomberg. In the week through Tuesday, hedge funds increased their net short positions in the euro by 1,305 contracts to 94,138. The bearish bets totaled around EUR11.8 billion ($13.2 billion).

The currency is under pressure from the situation in France, where lawmakers cannot agree on measures to reduce the country’s debt burden, while protests over the rising cost of living are escalating into clashes with police. French authorities are bracing for further unrest this weekend.

Speculators have held net short positions in the euro since February. This month’s turmoil has deepened concerns about slowing economic growth and raised doubts about whether the European Central Bank will raise interest rates and by how much, potentially widening the rate gap with the U.S., Bloomberg writes.

The euro also came under pressure on Friday from concerns that Moody’s would downgrade France’s credit rating amid the political and fiscal crisis, Reuters reported. However, Moody’s affirmed the country’s Aa3 rating with a negative outlook, whereas S&P and Fitch had downgraded France in autumn 2025. Moody’s announced its decision after markets closed.

Meanwhile, the euro has weakened against the dollar again this week. It snapped a five-week losing streak last week, but has now resumed its decline. The euro is on track to end this week 0.4% weaker against the dollar, Bloomberg writes.

Traders are looking ahead to next week’s policy meetings at the Fed, the ECB, and the Bank of Japan, Reuters notes. All three central banks are expected to leave rates unchanged, but investors will look for signals about the future path of monetary policy.