Analyzing Key Foreign Exchange Indicators after the US Jobs Report
Euro fell due to the vigorous US jobs report
The euro crashed compared to the US dollar by 1.3% on November 6, 2015. The strong NFP (non-farm payroll) numbers caused the euro-US dollar currency pair to fall. A reduction in the unemployment rate in October to 5% from 5.1% in the previous month increased the probability of a rate hike in the FOMC (Federal Open Market Committee) meeting in December. A strong NFP report showed a rise in employment at 271,000 in October compared to a 137,000 rise last month. This also fueled positive sentiment in the US Dollar Index.
In contrast, sluggish growth in the Eurozone caused the ECB (European Central Bank) to increase the stimulus package in the monetary policy meetings scheduled ahead. The divergence in policy stances between the Fed and the ECB has been driving the euro lower in the past few weeks. The Fed raising the rates and ECB increasing the QE (quantitative easing) program could be a double blow for the euro towards the end of the year. This has been putting more pressure on the euro. To learn more, read Euro Falls as Draghi Comments on Further Easing.
Sluggish Eurozone data lower the sentiment more
German industrial production rose by 0.2% on an annual basis in September—compared to 2.7% in the previous month and an expected growth of 1.6%. On a monthly basis, industrial production fell by 1.1%—compared to expected growth of 0.5% and a lower fall of 0.6% in August. However, Spain’s industrial production rose higher than the forecasts to 3.8% in September on a YoY (year-over-year) basis. On the other hand, the French trade deficit rose to 3.4 billion euros in September—compared to 3 billion euros in August and expectations of a deficit of 3.1 billion euros. The Greek trade deficit also rose to 1.6 billion euros in September from 1.11 billion euros in August.
Impact on the market
Looking at the performance of currency-based ETFs linked to the euro on November 6, 2015, the ProShares UltraShort Euro ETF (EUO) ended the day higher by 2.5%. EUO is inversely linked to the euro. In contrast, the Guggenheim Currency Shares Euro ETF (FXE), which has a direct relation to the euro, fell by 1.2%.
In terms of German ADRs (American depositary receipts) trading on US exchanges, SAP AG (SAP) fell 1.5%. The French ADR, Alcatel-Lucent (ALU) was trading stronger by 0.25%. The Greek ADR, National Bank of Greece SA (NBG) ended on a higher note by 4.3%.
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