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The FOMC Drives Key Global Foreign Exchange Indicators

PART:
1 2 3 4
Part 4
The FOMC Drives Key Global Foreign Exchange Indicators PART 4 OF 4

The Euro Falls Sharply as the Fed Is Open to a December Hike

Euro falls below 1.09

The euro–US dollar currency pair fell 1.2% on October 28, 2015, as the Fed delayed a rate hike and stated that it’s open to considering a rate hike in December. There were also very positive domestic data from Germany and Italy, but these countries were overwhelmed by the effect of the FOMC statement. The divergence in monetary policies from Europe and the United States strengthened slightly. Last week, the European Central Bank continued its dovish stance while the Fed continued with its slightly hawkish stance. The euro fell to a low of 1.090 and later closed at 1.092 on October 28, 2015.

The Euro Falls Sharply as the Fed Is Open to a December Hike

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Domestic data positive

In the Eurozone, major domestic data was released from Italy and Germany on October 28. Italian consumer confidence and business confidence for October beat forecasts by a big margin and came out at 116.9 and 105.9, respectively. On the German front, the GFK consumer confidence for November came at the forecasted value of 9.4. French consumer confidence failed to reach forecasts but still increase from the previous month’s levels to 96 in October.

Impact on the market

The iShares MSCI Italy Capped ETF (EWI) was trading on a positive bias and rose by 0.88% on October 28. In contrast, the euro-linked ETFs were negative, with the Guggenheim CurrencyShares Euro (FXE) falling 1.1%.

Italian ADRs were positive on October 28 with Luxottica Group (LUX) rising 1.2%. Eni SpA (E) also posted a gain of 1.6%. Telecom major Telecom Italia (TI) posted significant gains of 1.5%. In contrast, automotive giant Ferrari N.V. (RACE) posted heavy losses of 3.7%.

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