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Exchange traded funds tied to European markets and the Euro will come increasingly into focus over the coming days, as the ECB gets set to make its next interest rate decision next week, an event ING predicts will see the European policymakers take a cue from the Federal Reserve.
“A 75bp hike looks like a done deal but the European Central Bank has a lot on its plate at its October meeting,” ING projected in a research report authored by Carsten Brzeski, ING’s global head of macro, along with FX strategist Antoine Bouvet and senior rates strategist Francesco Pesole.
Going into the Oct. 27 meeting, a handful of European ETFs may be primed for increased volatility. This includes the Vanguard FTSE Europe ETF (NYSEARCA:VGK), which is the world’s largest European exchange traded fund, and its main competitor, the iShares MSCI Eurozone ETF (BATS:EZU).
Year-to-date price action: VGK -30.8% and EZU -32.2%.
Along with these broad regional ETFs, country-focused funds in the area could see increased action as well. See below six country-specific ETFs that can be in play, along with their 2022 performance:
Austria: iShares MSCI Austria ETF (EWO) -37.1%.
France: iShares MSCI France ETF (EWQ) -27.6%.
Germany: iShares MSCI Germany ETF (NYSEARCA:EWG) -37.1%.
Italy: The iShares MSCI Italy ETF (NYSEARCA:EWI) -31.8%.
Netherlands: iShares MSCI Netherlands ETF (EWN) -38.2%.
Belgium: iShares MSCI Belgium ETF (EWK) -31.5%.
As inflation soars across Europe and Christine Lagarde and the ECB prepare themselves for next week’s interest rate decision, ING Group argued that it appears the ECB has “turned a blind eye on recession risks but is highly determined to bring down inflation.”
The firm added: “Quantitative Tightening talks are premature but it will seek to mop up bank liquidity. Rates, sovereign and money market spread upside dominates with the 10Y Bund set to test 2.5%. None of this should be enough to support the EUR.”
In other European news, U.K. Prime Minister Liz Truss resigned Thursday after a tumultuous and short tenure.
