In what amounts to bad news for dollar bulls, the CurrencyShares Euro Currency Trust (NYSEArca: FXE) jumped 4.5% in the first quarter and that is with the European Central Bank (ECB) is actively seeking ways to weaken the euro.
Coming into this year, some market observers predicted the euro would not weaken against the U.S. dollar as much as was seen in the previous two years. The U.S. dollar has previously been strengthening on the prospect of a tighter monetary policy, which would help remove some of the excess liquidity sloshing around in the economy.
Good news for the euro and bad news for the greenback: Currency traders see more upside on the way for the common currency while many members of that community see more dollar downside coming.
The yield disparity between European stocks and bonds has been widening as recent global uncertainty pushed investors out of the equities market and into safe-haven fixed-income assets.
ECB President Mario Draghi has previously signaled that the ECB could expand its quantitative-easing program to bolster growth and bring inflation back up, stating that the return of inflation to target is more important than the impact of ultra-low rates.
[related_stories]“But there is a technical pattern developing within the downtrend that may bode well or the Euro over the near-term,” according to See It Market. “As you can see, the Euro hit the lower channel support late last year and has rallied off those lows. The month of March is nearing an end and the Euro is trying to close above last year’s closing highs – above resistance. As well, the monthly momentum indicator is very oversold and at levels last seen 15 years ago.”
In March, there was a delayed reaction to the ECB’s latest euro weakening efforts. Making matters worse for euro bears, the Federal Reserve opted against boosting U.S. interest rates, helping support FXE in the process.
CurrencyShares Euro Currency Trust
