The proximate cause of euro weakness is legible enough. Eurozone manufacturing PMI slipped to a four month low of 51.4, inflation undershot expectations enough to send the euro to a one year low against the pound, and the combination has pushed hike bets out of the ECB curve. Leveraged funds responded in kind: CFTC data through 23 June show euro spec_net at negative 67,504 contracts, a weekly move of negative 27,132, the flow classified as extended net shorts. That is a real repositioning, not noise, at negative 7.1% of open interest.
Yet the same report window shows leveraged funds doing the opposite at the front and belly of the Treasury curve. Five year note shorts fell by 52,735 contracts and ten year note shorts fell by 113,406, both flagged as short-covering rather than fresh buying. The two year, by contrast, saw shorts extend by another 76,269 contracts. That is a curve story, not a single directional dollar bet: funds are still short the front end, betting policy stays tight there, while trimming shorts further out, where growth and inflation risk have more room to reprice lower.
