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There’s not much in the way of top-tier reports from the euro zone this week, probably leaving the shared currency to take its cue from central bank rhetoric.  The franc could pay close attention to market sentiment as usual.

Medium-tier data from top economies

Quite a good number of medium-tier reports from the likes  of Germany and France are scheduled throughout the week, and these would likely give euro traders a good idea of how the region’s overall numbers might turn out.

Today we’ve got the retail sales report that could show a 1.4% rebound over the earlier 1.1% slide. German industrial production and trade balance are due on Tuesday, ahead of the French trade balance. Wednesday has the French industrial production report while Thursday has the Italian retail sales due.

ECB meeting minutes (Jan. 11, 12:30 pm GMT)

If the euro’s price action is anything like that of the previous week, it might be more sensitive to remarks from central bankers rather than economic releases.

The minutes of the ECB meeting should show what transpired before the central bank made its latest policy announcement, which was perceived by many to be less hawkish than expected. Keep in mind, however, that ECB policymakers also made upward growth revisions then, so bulls could stay on the lookout for more tightening clues.

Swiss data dump (Jan. 9, starting at 6:45 am GMT)

Switzerland doesn’t usually print a lot of data, but this week it’ll be unveiling three reports in a single day.

The unemployment rate is due first and analysts are expecting no change from the 3.0% figure. Next up is the foreign currency reserves data, which is often checked for clues of SNB forex intervention. After that, the Swiss retail sales report will be released and might show a 2.5% year-over-year drop, which would be an improvement over the earlier 3.0% slide.

Previous week review

Price action on the euro was a bit chaotic, especially near the end when price action clearly diverged. We can therefore safely conclude that the euro was vulnerable to opposing currency price action.

Overlay of EUR Pairs: 1-Hour Forex Chart
Overlay of EUR Pairs: 1-Hour Forex Chart

It should be noted, however, that the euro did have bouts of roughly uniform price action, so the euro wasn’t completely under the mercy of opposing currency price action.

One of the clearest examples of this is on Tuesday when the markets opened for the new trading year and the euro promptly caught a bid on most pairs. And the reason most market analysts cited for the euro’s early show of strength was ECB board member Coeure’s hawkish comments over the weekend that there’s a “reasonable chance” that we have seen the ECB’s final QE extension.

The euro also uniformly dipped after the initial rally. However, there were no apparent catalysts and market analysts when they pointed out that the euro took a hit.

The euro’s price action then became more mixed after that but became uniform once again come Thursday when the euro rose across the board.

And as I noted in Thursday’s London session recap, the euro’s broad-based rise was rather strange since the catalyst was apparently the Euro Zone’s final services PMI report.

This is a strange reaction because the euro usually doesn’t pay attention to the Euro Zone’s PMI reports. Moreover, the report released at the time was the revised reading and the revised reading only showed a slight improvement from 56.5 to 56.6.

Still, commentary from Markit were rather upbeat. Markit, for example, noted that survey respondents reported “the steepest increase in service sector activity for over-six-and-a-half years.”

In addition, the composite PMI for the Euro Zone as a whole came in at 58.1, which is the “highest reading since February 2011.”

After that, the euro’s price action became mixed. The Euro Zone’s December HICP report  was released on Friday, but the euro barely reacted, likely because the reported 1.4% year-on-year increase is within expectations.

The +1.4% headline reading is still a miss from the ECB’s forecast of +1.5%, but as mentioned in Friday’s morning London session recap, underlying inflation is still evolving within or better than the ECB’s forecasts, depending on the measure used.

The Swiss Franc

Overlay of CHF Pairs: 1-Hour Forex Chart
Overlay of CHF Pairs: 1-Hour Forex Chart

The euro was mixed but the Swissy fared rather poorly. So, did the euro and the Swissy finally part ways?

Well, not really. However, as you can see in the sample pairs below, the Swissy was clearly much weaker on Wednesday, which is when risk-taking ramped up.

The Swissy also had a hard time following the euro higher on Thursday since appetite for risk persisted. In short, the Swissy was clearly more vulnerable to risk sentiment, particularly the prevalence of risk appetite, which is why the Swissy is on the losing end this week.

CHF/JPY (red) vs.  EUR/JPY (black): 1-Hour Forex Chart
CHF/JPY (red) vs.  EUR/JPY (black): 1-Hour Forex Chart
NZD/CHF (inverted, red) vs.  EUR/NZD (black): 1-Hour Forex Chart
NZD/CHF (inverted, red) vs.  EUR/NZD (black): 1-Hour Forex Chart
USD/CHF (inverted, red) vs.  EUR/USD (black): 1-Hour Forex Chart
USD/CHF (inverted, red) vs.  EUR/USD (black): 1-Hour Forex Chart