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What Caused the Euro to Recover during a Volatile Day?

David Meyer

Key Indicators: What Caused the Australian Dollar and Euro to Rise?

(Continued from Prior Part)

Volatile day for the common currency

The euro-US dollar currency pair endured a volatile day of trading on November 12, 2015. The pair fell to a low of 1.07 in intra-day trade after the ECB (European Central Bank) President Mario Draghi’s testimony. Later in the day, the pair recovered. This was primarily due to the individual views of the FOMC (Federal Open Market Committee) members including Fed Chair Janet Yellen. The views came out in various public appearances. The currency pair retraced the losses and continued to rise. It ended the day at 1.08—a rise of close to 0.7% for the day.

Central bankers drove the euro

In his address to the European Parliament in Brussels, Mario Draghi continued to give a dovish view for the currency. He said that the Eurozone has been performing moderately even as the external demand slowed. This was partly due to the accommodative monetary policy stance. He added that the stimulus policy will be reexamined in the December meeting. The inflation dynamics have mainly weakened due to the lower crude prices and the delayed effect of the stronger euro exchange rate earlier in the year.

Janet Yellen was expected to give an indication on the rate hike. However, she avoided speaking about the rate hike. This helped the euro rise. Some of the other FOMC (Federal Open Market Committee) members, like William Dudley and Jeffrey Lacker, gave slightly hawkish views.

Impact on the market

The iShares Currency Hedged MSCI Germany ETF (HEWG) fell by 1.3%. The currency-based ETF linked to the euro, the ProShares UltraShort Euro ETF (EUO), also followed a similar trend. It fell by 1.2% on November 12, 2015.

In terms of ADRs (American depositary receipts) trading on US exchanges, German ADR Deutsche Bank (DB) had a significant fall of 2.0% on November 12, 2015. The software company SAP (SAP) remained almost flat with a slight fall of 0.25%. Also, French ADR Alcatel-Lucent SA (ALU) fell by 0.51%.

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