By world market pulse team on October 29,2010
Most of the world currency markets is brimming with activity as speculation over QE2 grabbing most attention. While the US dollar was unable to sustain its gains from the previous session Thursday morning coming under pressure ahead of the latest word on the US jobs market, the euro on the other hand snapped back against the dollar on Thursday, as better-than-forecast economic data from the Euro zone raised speculation that central bankers in Brussels will begin to normalize interest rates rather than ease further.
USD: The dollar has been unable to sustain its gains from the previous session coming under modest pressure ahead of the latest word on the US jobs market. The Fed meets on November 3 and is reportedly set to embark on a series of gradual asset purchases totaling a few hundred billion dollars. In 2009, the Fed snapped up around $2 trillion in an effort to spur the economy. Still currency experts feel that the dollar is relatively stable amid growing speculation that the size and scope of the Federal Reserve's anticipated bond purchase program is likely to be smaller than its first round of quantitative easing.
US Data Analysis: Initial US jobless claims fell to 434,000 from the previous week's revised figure of 455,000. The decrease surprised economists, who had expected claims to edge up to 458,000 from the 452,000 originally reported for the previous week. While there were no special factors cited for the decline in claims, analysts at Deutsche Bank are hesitant to read too much into the data, and the four-week moving average is still consistent with job growth of around 100k per month. Continuing claims registered a more robust decline of 122k to 4356k for the week of October 16, the lowest since November 22, 2008.
EUR: The euro meanwhile snapped back against the dollar after better than forecast economic data from the Euro zone raised speculation that central bankers in Brussels will begin to normalize interest rates rather than ease further. Economic confidence in the 16 countries that use the euro rose to its highest level in nearly three years during October, the European Commission said on Thursday. The euro rose to $1.3910 versus the greenback, paring most of this week's losses. With the advance, the euro moved back towards a recent 8-month high near $1.4150.
EUR Data Analysis: The European Central Bank lowered interest rates to a record low one percent during the throes of the worst recession in decades, but has resisted additional rate cuts despite a sluggish economy. Analysts at Deutsche Bank have meanwhile suggested that the euro is still in a correction mode and may remain so while the EU summit is in session. Good support enters today only at 1.3610.
Euro ETFs To Watch Out For:
Rydex CurrencyShares Euro Currency Trust (FXE): The EUR/USD exchange rate is a foreign exchange spot rate that measures the relative values of two currencies, the euro and the U.S. dollar.
FXE Tracks: Euro Index. Expense Ratio: 0.40%
Short Euro ETFs
ProShares UltraShort Euro (EUO): ProShares UltraShort Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the U.S. Dollar price of the Euro.
EUO Tracks: Euro (-200%) Index. Expense Ratio: 0.95%
Market Vectors-Double Short Euro ETN (DRR): As the Index is two-times leveraged, for every 1% weakening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% strengthening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%.
DRR Tracks: Double Short Euro Index. Expense Ratio: 0.65%
Long Euro ETFs
ProShares Ultra Euro (ULE): ProShares Ultra Euro seeks daily investment results, before fees and expenses, that correspond to twice (200%) the U.S. Dollar price of the Euro.
ULE Tracks: Euro (200%) Index. Expense Ratio: 0.95%
Market Vectors-Double Long Euro ETN (URR): As the Index is two-times leveraged, for every 1% strengthening of the euro relative to the U.S. dollar, the level of the Index will generally increase by 2%, while for every 1% weakening of the euro relative to the U.S. dollar, the Index will generally decrease by 2%.
URR Tracks: Double Long Euro Index. Expense Ratio: 0.65%
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