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The Euro Falls after the US FOMC’s Decision, Compounded by Weak Domestic Data

David Meyer

Currencies Roasting on an Open Fire: World Money on December 17

Euro takes support at 1.08

The EU euro and US dollar currency pair fell sharply after the US Fed announced a hike of 0.25% in the federal funds rate. The currency pair fell to a low of 1.079, where the euro was seen getting a support. The fall in the currency was also attributed to the lower-than-expected economic sentiment release from Germany. The pair had a slight rise toward the end of the day, closing near 1.084.

German business climate disappoints

The Ifo (Institute for Economic Research) published the business climate for the month of December on December 17, 2015. The report showed a decline in sentiment as it came out at 108.7, compared to the previous month’s 109 and the forecast of 109.2. The construction and wholesaling index also came down compared to the previous month. The fall was partly offset by the rise in the manufacturing index. Among other data from the Eurozone front, the Italian trade balance, published by Istat, came out at approximately €4.8 billion, compared to expectations of approximately €2.9 billion.

Impact on the market

Now let’s look at the performance of currency-based ETFs linked to the euro on December 17, 2015. The ProShares UltraShort Euro ETF ( EUO ) ended the day 1.9% higher. We should note that EUO is inversely linked to the euro. By contrast, the Guggenheim Currency Shares Euro ETF ( FXE ) has a direct relation to the euro, and FXE fell by 0.93% on December 17.

Meanwhile, in the world of ADRs (American depositary receipts) trading on US exchanges, German ADR Deutsche Bank ( DB ) fell by 0.96% on December 17. Notably, SAP SE ( SAP ), a software company, was trading on a flat note on the same day, registering a slight fall of 0.09%. At the same time, the French ADR Alcatel-Lucent SA ( ALU ) had a significant fall of 2.6%.

Continue to the next part of this series for a look at how the euro performed on December 17, 2015.

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