The euro’s recent strength is driven by real money flows and the unwind of EM positions. As highlighted in our Flow Report, last week hedge funds were selling EUR, but non-leveraged accounts (real money) were large buyers. On a directional basis, the real money flows are larger than the three remaining client types. We have seen such a pattern before, in early 2013 and most recently in June 2013. In both instances, when EM Asian FX weakened, EUR-USD rallied – breaking its long standing correlation. Eventually the USD correlation returned - 12 days the first time and four weeks the second. The lower the EZ tail risk ... (full story)