The Euro just fell from 1.1380 to 1.295 to the dollar as a news flashed across Bloomberg terminals that the market “misinterpreted” ECB President Mario Draghi’s bullish remarks yesterday.
Draghi’s speech at an ECB conference in London sent the Euro soaring after he spoke of strong growth and reflation. Once everybody piles into a trade, though, it’s easy to get trampled on the way out. At a 12-month horizon the Euro is a great bet. The question is how much pain hedge funds can endure while waiting for the Euro to rise (it costs money to borrow dollars, sell them, and invest them in Euros because of the interest rate differential.