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Tightening expectations and the upbeat performance of European equities buoyed the shared currency higher for the most part of the previous week while the franc took its share of gains from risk-off flows. What’s next?

ECB head Draghi’s speech (Feb. 5, 4:00 pm GMT)

The euro action could heat up as early as today’s London session when ECB head honcho Draghi steps up to the podium, possibly to share more insights on inflation, euro appreciation, monetary policy, and Justin Timberlake’s Super Bowl halftime performance.

Note that a number of ECB policymakers have already expressed concerns about the potential impact of euro strength on inflation prospects, so most market participants are keen to find out if the Governor himself shares those views. A bit of jawboning could prod the euro back down but sidestepping this issue could allow the shared currency to keep rising.

Another round of medium-tier data

The data dump continues! Another batch of medium-tier figures from the region’s top nations is lined up throughout the week, providing euro traders with more clues on how the economy is doing overall.

This week we’ve got final services PMI readings, German factory orders, German industrial production, French and German trade balance data, and Italian industrial production – none of which are expected to have a pronounced impact on euro price action.

Still, it’s worth keeping tabs on these figures and watching out for any general trends since these could shape monetary policy expectations and European market performance.

Last Week’s Price Review

The Euro

The euro edged out the Swissy and is the best-performing currency of the week (as of 2 pm GMT). The euro’s position at the top is not yet set in stone, however, since the U.S. dollar is rapidly closing the gap due to the better-than-expected NFP report and the trading day is far from over.

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

Anyhow, the euro had a mixed performance and was roughly trading sideways on most pairs from Monday to Wednesday.

The euro’s chaotic price action on Wednesday is particularly noteworthy since the Euro Zone’s CPI report was released, but that apparently didn’t have an effect on the euro’s price action, even though the CPI report was net negative.

Anyhow, the reason why the euro is this week’s champion is the euro’s broad-based climb on Thursday and Friday. But as noted in Thursday’s London session recap, there weren’t really any apparent catalysts that could have stoked demand for the euro.

However, I also noted in Thursday’s London session recap that market analysts attributed the surge in global bond yields, including European bond yields, partially on the Fed’s more upbeat tone on inflation since that apparently reinforced expectations that the Fed will continue to hike this year.

And that, in turn, supposedly raised expectations that monetary policy in Europe will soon tighten soon as well.

The euro continued to rise on Friday, although it did begin to give back some of its gains against the Greenback, which culminated in EUR/USD getting kicked sharply lower because of the upbeat NFP report.

The Swiss Franc

The Swissy is the second strongest currency of the week after the euro (as of 2 pm GMT). However, the Swissy’s win against the Greenback is razor-thin, so I wouldn’t be surprised if the Swissy gets knocked down in the rankings table by the end of the week. Although it’s also possible for the Swissy to win out against the euro since the euro only barely edged out a win against the Swissy.

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

As to whether the euro and Swissy are still dancing in tandem, yeah, they pretty much are, as can be seen in the sample pairs below.

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