Exchange traded funds that reflect the movement of the euro currency were weaker after European Commission President Jacques Delors said the European Union is in a precarious situation.
CurrencyShares Euro Trust (NYSEArca: FXE) and iPath EUR/USD (NYSEArca: ERO) were both down about 1%.
Delors made his comments on the state of the European Union after the fruitless talks between German Chancellor Angela Merkel and French President Nicolas Sarkozy, according to AFP.
“Open your eyes: the euro and Europe are on the edge of the precipice,” commented Delors, in the report. “To avoid falling, the choice looks straightforward to me: either member states accept the robust economic partnership I always demanded, or they transfer more powers to the Union.”
Delors has advocated for a partial mutual pool for Eurozone member debts of “up to 60% of GDP,” arguing that a pooling of debt would “put out the fire” on money markets.
The risk-aversion trade on Thursday pushed the euro lower against the U.S. dollar, reports Anusha Shrivastava for The Wall Street Journal.
“Risky assets underperform in an environment where there’s real economic worsening amid high inflation and policy intervention that does not appear to be forthcoming any time soon,” stated Aroop Chatterjee, forex strategist at Barclays Capital.
In this type of market environment, “risky assets will underperform and the safe haven assets like the dollar, the Swiss franc and yen will do well,” Chatterjee added.
CurrencyShares Euro Trust
For more information on the European euro currency, visit our Euro category.
Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.
Max Chen contributed to this article.
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