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German coalition updates barely sustained the euro’s climb last week as the focus shifted to the mixed signals from the ECB statement. What’s coming up next?

Medium-tier data dump (Jan. 30 & 31)

It’s all about preliminary data from the euro zone this week as its top economies gear up to print their initial estimates for CPI and GDP figures. Apart from that, consumption data is also lined up as Germany will release its retail sales report while France will print its consumer spending data during the first half of the week.

Germany’s preliminary CPI reading is up for release on January 30 and this could be the first glimpse into the region’s inflation figures for this month. Note that analysts are expecting to see a 0.5% decline in price levels. France will release its own flash CPI on January 31 and might report a 0.3% drop.

Jobs figures are also up for release from Germany, Spain, and Italy throughout the week. While these medium-tier reports don’t usually generate a strong directional move for the shared currency, it’s helpful to take note of the results since these could shape ECB policy biases.

Euro zone flash CPI (Jan. 31, 10:00 am GMT)

It might be a mixed bag for the flash CPI readings this month as the headline figure could dip from 1.4% to 1.3% while the core figure is expected to tick higher from 0.9% to 1.0%.

As mentioned earlier, the preliminary CPI readings from the region’s top economies could provide excellent clues for how these numbers might turn out. Also, keep in mind that the shared currency has been climbing for the most part of January, which suggests downside pressure on price levels – something that ECB officials are already starting to worry about!

Last Week’s Price Review

The Euro

The euro was one of the worst-performing currencies last week, but it’s currently on course to finishing as the third best-performing currency this week (as of 2 pm GMT).

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

The euro started the new trading week by gapping higher across the board, thanks to news over the weekend that SPD members have voted to support coalition talks with Angela Merkel.

There was no follow-through buying, however, and those gaps were quickly filled. After that, price action on the euro became a mixed mess until Wednesday when most euro pairs encountered bearish pressure.

There was no clear reason for the euro’s weakness, however, and most market analysts just ignored the euro’s weakness on most pairs and focused only on EUR/USD’s strength, likely because that’s easier to explain away.

Anyhow, the euro’s price action became a mixed mess again after that until the ECB presser came along and caused the euro to jump higher across the board since ECB Overlord Draghi was rather optimistic on the Euro Zone economy. Draghi also said that the ECB does not target the euro’s exchange rate. Although he did try to talk the euro down when he said that:

“Against this background the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability.”

That didn’t seem to faze the euro, however, although the euro did begin to lose ground to the Swissy at this point.

Anyhow, the euro’s price action became mixed again while trading roughly sideways. The euro was able to keep its post-ECB presser gains on most pairs, however, so the euro is currently on the winning team.

The Swiss Franc

The Swissy is a net winner yet again. In fact, the Swissy even outperformed the euro. Heck the Swissy was not just an outperformer – it’s THE best performer of the week (as of 2 pm GMT)

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

I already mentioned earlier when we discussed the euro that the Swissy actually began to win out against the euro after the ECB presser. This is rather weird since the ECB presser usually benefits the euro and the Swissy only gets a free ride. But in this case, it seemed to be the other way around.

However, the most likely reason is that SNB Overlord Jordan was being interviewed by CNBC at around the time of the ECB presser. And while Jordan repeated his mantra (or threat) about intervening and whatnot, Jordan also said that (emphasis mine):

“What we don’t look at is specific exchange rates. We look at all the exchanges together and see what is the impact on the Swiss economy and then, if necessary, decide whether to intervene or not.”

Perhaps traders took that as a hint that the SNB is not really in an intervening mood. And in effect, the Swissy got a boost from the ECB presser and then another boost because of Jordan’s comments, allowing the Swissy to outperform the euro.

Other than that, the Swissy also apparently benefited from safe-haven flows when risk aversion began to appear on Wednesday.

And if you’re wondering, yes, the euro and the Swissy are still dancing in tandem. But as can be seen in the sample pairs below, the Swissy (red) outperformed the euro on Wednesday and got a bigger boost than the euro on Thursday.

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