EUR Fall to Parity on Hold as Cash Flows into Stocks

After its biggest slide since being created in 1999, the euro is finding a floor.

A torrent of money unleashed by the European Central Bank is fueling demand from U.S. and other international investors for the region’s stocks — and the currency needed to buy them. Global mutual funds and exchange-traded funds that focus on European equities attracted $63.6 billion this year through April 22, up 70 percent over the same period in 2014, according to data compiled by EPFR Global.

Rather than being a referendum on the outlook for growth in the euro zone, demand for the 19-nation currency reflects appetite from investors who want a piece of this year’s 19 percent rally in the region’s stocks.

“European equities went from being an incredibly unloved asset class to very fashionable almost overnight,” David Donabedian, the Atlanta-based chief investment officer at Atlantic Trust Private Wealth Management, which oversees $26.2 billion, said April 23. “In the short term, the euro will probably firm a bit more.”

Demand for the region’s equities has driven the Stoxx Europe 600 Index to a record since ECB President Mario Draghi announced his quantitative-easing plan on Jan. 22. The gains mirror the reaction during the Federal Reserve’s third bond-buying program, which ran from September 2012 to October 2014 and sent U.S. stocks higher. The dollar strengthened about 10 percent in that time.


Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell