Investor Sentiment Shifts as More View Euro as Undervalued – BofA Survey

Investor Confidence in Euro Rises Sharply as Undervaluation Perception Surges — BofA Survey

Investor sentiment toward the euro experienced a marked shift in May, as a growing number of fund managers now view the common currency as undervalued. According to Bank of America’s latest Global Fund Manager Survey, 22% of investors believe the euro is undervalued, up from just 5% in April. This 17-percentage-point jump represents the largest monthly increase in such sentiment since August 2020.

The change reflects a broader reevaluation of the euro’s positioning in global currency markets, amid shifting interest rate expectations, improving economic indicators within the eurozone, and reduced concerns over geopolitical risks compared to earlier in the year.

In recent months, the euro had come under pressure due to its relative weakness against the U.S. dollar, driven by diverging central bank policies and lingering inflation uncertainty in the euro area. However, signs of economic resilience, combined with growing market speculation that the U.S. Federal Reserve may delay or reduce the number of interest rate cuts this year, appear to have supported a reassessment of the euro’s long-term value.

The BofA survey suggests that institutional investors may now be positioning for a recovery in the euro, particularly if the European Central Bank begins adjusting its policy stance in response to easing inflation and improving data. Additionally, the shift could be tied to broader dollar skepticism, as recent surveys have shown declining investor exposure to the greenback.

The notable rebound in confidence underscores how quickly sentiment can shift in foreign exchange markets and may signal increased volatility—or opportunity—for euro-based assets in the coming months.