Diversified Europe exchange traded funds have been among this year’s top ex-U.S. developed markets performers, but even with deep double-digit gains in some cases, Europe ETFs have the potential to deliver additional upside.

With the improving economic outlook, more observers expect European companies to produce healthier returns. According to Barclays, Europe’s first-quarter earnings are showing better-than-expected results as a weak euro bolstered exports, CNBC reports. Moreover, the bank pointed out that smaller companies are also seeing significant growth.

Improving earnings amid a backdrop of quantitative easing and faltering currencies bolsters the outlook for ETFs such as the Deutsche X-Trackers MSCI Europe Hedged Equity ETF (NYSEArca: DBEU).

Quantitative easing was announced by the ECB on January 22, 2015, a mere 4 months ago. There is still a long runway for stocks as Euro area interest rates are at zero or even negative in some cases. These low interest rates, as we have seen occur in the U.S, will push investors to the stock markets of Europe and drive asset prices higher. The open-ended nature of the ECB quantitative easing program lends weight to the long runway ahead of Euro markets as the ECB has firmed its commitment to achieving its goals by not putting an absolute limit/timeframe on its asset purchase program,” writes Alec Brosnahan in a Seeking Alpha post.

As a currency hedged ETF, DBEU is well-positioned to not only profit from ECB QE, but moves by central banks to lower interest rates in other developed Europe markets. The ETF allocates nearly 46% of its combined weight to British and Swiss stocks while also featuring decent exposure to Nordic countries. Sweden, 4.5% of DBEU’s country weight, is one example of a Nordic nation that has pared rates this year. [More Upside Seen for Currency Hedged ETFs]

As a currency hedged ETF, DBEU has found itself front and center amid one of 2015’s hottest ETF themes. The ETF has added $626.3 million of its $2.57 billion in assets under management since the start of the year. More importantly, DBEU is highlighting the currency hedged advantage in a strong dollar environment. [Stunning Growth for This Currency Hedged ETF]

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