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Euro Falls as Markets Come to Terms with the ECB’s Policy

David Meyer

Euro Falls, US Dollar Index Rises, and Canadian Dollar Is Flat

Euro falls by 0.50%

The euro-US dollar pair fell by close to 0.50% on December 4, 2015. It closed at 1.0886. The pair exhibited significant gains above 3.0% on December 3, 2015, after the ECB’s (European Central Bank) monetary policy came out. The pair was already on a correction mode. It was compounded by the positive employment report from the US.

The positive German factory orders data did little to keep the euro positive. To learn more about the ECB’s policy, read  The Euro Rallied after Mario Draghi’s Press Conference.

Euro guided by domestic and foreign data

Destatis released the German factory orders. They were positive on December 4, 2015. The factory orders came out at 1.8%. This was above the forecasts of 1.3%. The Finland GDP (gross domestic product) also came out on the same day. It showed that the economy is shrinking. The GDP fell by 0.2% YoY (year-over-year). Even though the GDP growth was negative, it was above the expectations of a 0.7% fall. The fall in the euro-US dollar currency pair was mainly due to the US non-farm payrolls data at 211,000. This encouraged the markets enough for a December interest rate hike by the Fed.

Impact on the market

Looking at the performance of currency-based ETFs linked to the euro on December 4, 2015, the ProShares UltraShort Euro ETF (EUO) ended the day 1.5% higher. EUO is inversely linked to the euro. In contrast, the Guggenheim Currency Shares Euro ETF (FXE) has a direct relation to the euro. FXE fell by 0.71%.

In terms of ADRs (American depositary receipts) trading on US exchanges, German ADR Deutsche Bank (DB) rose by 0.55% on December 4, 2015. SAP (SAP), a software company, was also on a positive trajectory. It rose 0.62%. The French ADR Alcatel-Lucent SA (ALU) rose 0.50%.

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