Euro Falls against Dollar, Rises against Yen on Improvements in Italy

The euro fell on Monday against the U.S. dollar. At the same time, the European currency moved higher against the Japanese yen. At the moment, the euro is trading at around $1.4342 against the U.S. dollar, or 0.052% below previous close, while the euro added 0.039% to its value against the yen to trade around ¥115.30. The euro found some strength in better than expected industrial output in Italy. According to Istat, Italy's industrial production surged 1% in April from 0.7% recorded in March. Most analysts expected the April industrial output to be only 0.1% higher than in the previous month. On an annual basis, the Italian industrial output grew 3.7% in April from 3.4% in March. Italy is considered one of Europe's weaker economies with significant debt problems. Strong industrial production performance will provide reassurances to traders that the divide between some of the center countries and the periphery countries is getting smaller. The euro's gains were probably halted by continuing problems in Greece, the Eurozone's most troubled economy. The Greece situation is not being ameliorated by disputes between Germany, the Eurozone's largest and most powerful economy, and the European Central Bank over how to proceed with resolving the Greek debt problems. The German position includes a role for private investors in the second round of the Greek bailout, a position the ECB opposes. The euro's gains against the yen are party contributed to Japan's underperformance in core machinery orders. In April, Japan's core machinery orders fell 3.3% from a month earlier. The April fall highlight the persistence of the supply shortages that have marred the Japanese economy since the outbreak of the earthquake/tsunami disaster. The Japanese economy is exports-driven, primarily by its strong manufacturing sector. Therefore, any collapse in the performance of Japan's manufacturing sector should spill over to the rest of the economy, putting downward pressure on the yen. Traders who believe the Eurozone periphery will continue to improve its economic performance and that the Greece debt problems will be successfully resolved, which should provide a lot of tailwind to the euro, will be interested in the ProShares Ultra Euro ETF ULE, the WisdomTree Dreyfus Euro Fund EU and the ProShares Ultra Euro ETF ULE. Other traders will be worried that divisions within Europe, like the one between Germany and the ECB, will limit Europe's effectiveness in dealing with the Greece debt crisis. As a result, the financial stability of Greece, but also of Ireland and Portugal, will be in jeopardy, which should push the value of the European currency downward. Traders who believe in this scenario will be interested in the Market Vectors Double Short Euro ETN DRR and the ProShares UltraShort Euro ETF EUO.