The euro-related exchange traded fund surged Tuesday, with the EUR currency touching its highest level in 18 months after the European Union came to a historical agreement on a coronavirus aid package to bolster the pandemic-ravaged economies.
The Invesco CurrencyShares Euro Currency Trust (NYSEArca: FXE), which tracks the euro currency against the U.S. dollar, advanced 0.7% on Tuesday while the EUR was up 0.7% to $1.1522.
Meanwhile, the Vanguard FTSE Europe Index Fund ETF Shares (NYSEArca: VGK) gained 0.2% and iShares MSCI Eurozone ETF (BATS: EZU) was 0.4% higher.
The euro currency strengthened to its highest level since January 2019 after EU leaders agreed on an initial plan of 750 billion euros, or $860 billion, Bloomberg reports.
“We did it. Europe is strong. Europe is united,” European Council President Charles Michel, who hosted the summit, said in a press conference Tuesday, the Wall Street Journal reports. “These were, of course, difficult negotiations in very difficult times for all Europeans. This is a good deal. This is a strong deal.”
The emergency relief fund will dole out 390 billion euros of grants and 360 billion euros of low-interest loans. The agreement was a historical event as this is the first time member states will underwrite a joint bond issuance. Some have even likened the moment as the bloc’s Hamiltonian moment, referring to Alexander Hamilton, the first U.S. Treasury Secretary, who had the federal government take on the debts of U.S. states.
The recovery fund will “give EU GDP a boost when their economy is likely recovering already – so an added kick,” Steve Englander, head of Group-of-10 currency research at Standard Chartered, told Bloomberg.
The relief fund is aimed to boost Europe’s economic recovery and allow Italy, Spain, Greece, and others to increase government spending without fear of already high national debt levels. Wealthier northern countries believed that helping these beleaguered countries now was preferable to a potential currency crisis later.
For more information on the European markets, visit our Europe category.