Euro ETF Surges as ECB's Draghi Triggers Volatility

  • Euro currency ETFs strengthen as investors digest expanded stimulus policy
  • Stronger euro currency helped prop up the non-hedged Eurzone ETFs
  • European stocks also pushed higher earlier after the ECB said it would lower deposit rates to minus 0.4% from minus 0.3%

The euro currency exchange traded fund strengthened and Eurozone equities reversed earlier gains, as investors digested an expanded stimulus policy but balked at the end of further rate cuts.

On Thursday, the CurrencyShares Euro Currency Trust (NYSEArca: FXE) jumped 1.8%, with the euro trading at about $1.1196.

Meanwhile, the non-hedged iShares MSCI EMU ETF (NYSEArca: EZU) and SPDR EURO STOXX 50 (NYSEArca: FEZ) were more or less flat Thursday after gaining in earlier trading.

The strengthening euro currency helped prop up the non-hedged Eurzone ETFs – the funds track EUR-denominated securities, so returns are augmented when translated into USD terms. In contrast, the Stoxx Europe 600 Index lost 1.7% at the close of trading Thursday, its largest decline in two weeks, after rising as much as 2.5% in its first response to the ECB’s actions.

The EUR appreciated against the U.S. dollar and Eurozone equities weakened as investors grew pessimistic over the European Central Banks’ ability to further prop up an ailing economy.

Initially, the euro plunged after the ECB cut its main interest rates and said it would raise expand the pace and scope of its bond-buying stimulus program, along with a fresh round of cheap loans to banks, reports Tommy Stubbington for the Wall Street Journal.