The vaunted E.U. summit this week ended is disappointment for watchers. Of the two firm things that came out of the summit, it’s questionable whether either will support euro exchange traded funds (ETFs).
Europe’s high officials have undertaken Herculean measures to stay afloat and prevent a breakup, among the 16 country currency that is binding them together-the euro. Eva Szalay for The Wall Street Journal reports that the currency has gained more than 2% against the dollar since the beginning of the month, trading as high as $1.35 Tuesday. [Europe ETFs: Are They A Buying Opportunity?]
The European Union crafted a plan to save the currency:
- Leaders agreed to put together a permanent European rescue fund once the present $975 billion fund runs out of cash in 2013. [ETFs Shrug Off Possible Spain Downgrade.]
- Leaders pledged to do whatever is necessary to keep the euro afloat, says The Washington Post.
Although the euro has benefited recently from a number of factors – relatively quiet bond markets, a weaker dollar and a lack of rate increases in China (so far) – it may not be seeing a turnaround anytime soon, says Bryan Rich for Money and Markets. [Play the Currency Wars With ETFs.]
The lack of a firm resolution to solve the debt crisis and keep the euro on solid ground won’t do much to inspire confidence. Until the European Union gets some firm, detailed plans in place, euro ETFs like WisdomTree Dreyfus Euro (NYSEArca: EU) and CurrencyShares Euro Trust (NYSEArca: FXE) might feel some pain in the short-term. Both, in fact, are less than 1% above their long-term trend lines after recent downward moves.
Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.
Tisha Guerrero contributed to this article.
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