Exchange traded funds that track European assets strengthened over August as central bank actions helped bolster confidence in Eurozone markets.
“Two things stand out when you look at August. The Fed minutes signaling that they’d take a more active stance and the ECB talking about bond purchases,” James Ashley, senior European economist at RBC Capital Markets, said in a Wall Street Journal article. [European ETFs Recover on Central Bank Hopes]
“Markets moved quite dramatically after the ECB announcement [on Aug. 2] and Spanish and Italian yields have fallen substantially. We will probably see these events repeated next month, with the ECB fleshing out how it will be buying bonds and with speculation that the Fed will extend stimulus measures,” Ashley added.
Currently, the equities markets are waiting on the Fed, but “if you were reading between the lines of Bernanke’s speech, there were heavy hints that the Fed will do [a third round of quantitative easing],” Ashley said.
Along with European stocks, the euro currency has also appreciated against the U.S. dollar. The CurrencyShares Euro Trust (NYSEArca: FXE) gained 2.0% over the past month.
Looking ahead, Eurozone observers will be keeping an eye on September 12 and 13. Specifically, the Germany courts will rule on the legality of the Eurozone’s permanent rescue fund, Dutch elections will take place and the the FOMC meeting will decide on additional quantitative easing.
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Max Chen contributed to this article.