Low interest rates and a massive level of liquidity seem sto
be the name of the game for Central Bankers across the globe, and
especially from the developed market space.
The European Central Bank (ECB), Bank of England, Bank of
Japan and the Federal Reserve, all seem to be determined to keep
printing money and undertake expansionary monetary and fiscal
policies to give economic growth a head start in their troubled
Malaysia ETF Surges on Election Result
In this liquidity driven low interest rate environment, it is
very important for currency traders to keep a keen eye on the
monetary policies across the globe as this can have tremendous
consequences on these currency pairs.
In this regard, a mention of the key personnel of Central
Banks across the globe is worthwhile as they have pretty much
been the ultimate sources driving market sentiments. While Ben
Bernanke and his policy statements and actions have pretty much
been responsible for the market uptrend in the U.S., Mario Draghi
is easily the key person as far as Europe is concerned (read
Bet on the Euro with These 3 ETFs
Draghi's statements and policy actions have been instrumental
in shaping the European markets for quite some time. While the
interest rates across many of the troubled PIIGS nations have
decreased substantially, European equities have taken cues from
most of the developed market counterparts and pretty much been on
a solid uptrend.
Nevertheless, in Monday's trading session, the Euro
experienced extremely volatile trading following Mario Draghi's
statement which symbolizes willingness to slash interest rates
further if the situation demanded (see
Base Metal ETFs Soar on Strong Data
Consequently, what was building up to a pretty subdued trading
session for the
CurrencyShares Euro ETF (
, turned out to be an extremely volatile one for the ETF.
FXE closed the day to finish at $129.58 down -0.31% for the
day. The following chart depicts the intraday trading action for
the Euro ETF and the subsequent drop following Mario Draghi's
Although this event-driven phenomenon might seem to be a
disturbing one for most investors seeking an exposure to the Euro
ETF, there is hardly any reason to worry going forward (see
Has the Euro ETF Bottomed Out?
The ECB and its policy measures have been able to inflict some
sort of stability in the Eurozone after a disastrous 2011. And
going forward, this trend is most likely to continue.
Not to mention, that the Euro is already trading at depressed
levels thanks to the loose fiscal policies undertaken by the ECB.
Therefore a further downside seems less likely, at least at this
point in time.
Still, investors in this foreign currency ETF should pay close
attention to any more comments from the ECB chairman going
forward. These comments clearly have the ability to drive the
markets, and could result in increased volatility in the weeks
and months ahead.
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