Bloomberg News

Investors Should Bet Euro Will Rise Against Pound, Nordea Says

October 12, 2011

Oct. 12 (Bloomberg) -- Investors should buy the euro versus the pound, betting the 17-nation currency will appreciate to 90.70 pence, according to Nordea Bank AB.

“The single currency is rallying,” Stockholm-based strategists Jonas Thulin, Nils Rosendahl and Alexander Wojt wrote in an e-mailed note today. “This is against our macro- view but could be a good opportunity as euro seems to be off for a massive short-squeeze rally.”

The bank recommends purchasing the euro at 87.70 pence, and exiting the trade if the shared currency weakens to 85.90 pence, the analysts said.

The euro was little changed at 87.51 pence at 1:22 p.m. in London, after strengthening from a six-month low of 85.30 pence on Sept. 12.

In a short squeeze, a lack of supply forces prices upward and traders with short positions are forced to buy securities to cover their positions and limit losses. The surge of buying results in even higher prices.

--Editor: Nicholas Reynolds, Mark McCord

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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