An exchange traded fund pegged to the euro’s movements against the dollar is nearing the January low on speculation Greece will exit the EU.
The latest failure from Greek officials to form a government has increased concern the crisis could spread to other economies.
“Greek politicians failed Tuesday to agree on a coalition government in a final round of talks among party leaders in Athens. A caretaker government was installed Wednesday to lead the country to a fresh vote,” MarketWatch wrote last week.
“The market is looking for further stimulus from the European Central Bank somewhere down the line more but what that will be is unclear. It’s now a waiting game to see what happens next,” Kevin Pearce, senior broker for currency deposits and derivatives at interdealer broker ICAP said.
Guggenheim CurrencyShares Euro Trust (NYSEArca: FXE) gives investors pure exposure to the currency’s movements against the U.S. dollar. This ETF is only intended as a short-term speculative bet for use in a diversified portfolio. With currencies, the long-term expected return is zero after adjusting for differences in interest rates, explains Michael Rawson for Morningstar. [Euro, France ETFs in Focus After Elections]
The underlying mood is ruled by uncertainty, with expectations of a Greek exit from the Eurozone still building ahead of a second round of elections, expected June 17, and the cost of insuring Spanish sovereign debt against default hitting another record high. [Why Currency ETFs Haven’t Caught on Yet]
In a note, Morgan Stanley said the growing disparity between different euro-zone government bonds, after yields hit record lows this week in safe-haven countries like Germany, while hovering near levels deemed unsustainable in others, could hurt the euro in the long run. [Euro, Stock ETFs go Their Separate Ways]
Guggenheim CurrencyShares Euro Trust
Tisha Guerrero contributed to this article
Read the disclaimer; Tom Lydon is a board member of the funds for Guggenheim Investments.