Today so far, Moody’s have downgraded Ireland to Aa2 (EU member), The IMF has withdrawn its loan to Hungary (EU member) and the EU’s own current account deficit widened again in May. And EU exports are being held back by the strengthening Euro, although nobody has a sane reason why this mickey mouse currency might gain at all. They have one reason – lots of Eurozone biggies have said there’s nothing to worry about – but it’s very far from any known definition of sanity.

This morning, therefore, every major currency is down against the Euro.

Sorry, the ‘therefore’ is ironic. According to Bloomberg data, even before today’s further strengthening, the Euro was 14% overvalued. So why is this happening?

Opinions, as the Americans say, are like arseholes: everyone’s got one. But logical explanation is there none….apart from the most disturbing. This is what a Spain-based currency dealer told The Slog earlier today:

“Hedge funds have got some pretty big bets on right now. And the sovereign default/demise of the euro bet is bigger by far than any other baby out there. We think a combo of hedge funds and a few other big players are talking up the euro to foul up any remaining chance of export-led EU recovery. We can’t prove it – nobody can** – but that’s the favourite theory this morning. It makes sense, especially as there’s no other realistic explanation”.

Several media were speculating relatively logically over the weekend that a second explanation for the Euro’s rise is simply growing unease about the US outlook. But the US outlook worsened because everyone got depressed about the EU’s economic performance and growing deficit….

Yes, it is enough to make you want to give up. That’s why I ignore the temptation to do any short-term stuff any more: I take a longish view on Sterling and Gold, and although they’re going the wrong way now, I’m confident they’ll go the right way in the end….because the end is nigh.

* This column and several opinion leaders have Goldman Sachs as a lead peformer in the ‘others’ category.
** Our source is so confident nobody can prove anything, because he too has studied high-speed trading and dark liquidity pools.