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The euro was still stuck in the losers’ bench last week while the franc had more of a mixed run. Are there any catalysts that could provide better direction this week?

Preliminary GDP releases (Feb. 14)

Will the euro get some love from traders or will bulls’ hearts break on Valentine’s Day? It might all come down to the preliminary GDP releases from the region’s top economies, as well as the euro zone flash GDP reading!

Germany and Italy are set to release their growth figures ahead of the overall GDP reading for the region. The former could show a 0.6% expansion, slower than the earlier 0.8% reading, while the latter might show a slightly faster 0.5% growth compared to the earlier 0.4% figure.

Meanwhile, the region could show another 0.6% expansion for Q4 2017, probably just enough to keep ECB tightening expectations in play. Keep in mind, however, that policymakers seem to be watching inflation and euro strength more closely these days so these reports could still be a dud.

Overall risk appetite

We’ve seen last week how overall risk sentiment could affect high-yielding comdolls like the Aussie and Kiwi. Although the franc has struggled to hold on to its safe-haven gains then, an extension of these risk-off flows could ultimately benefit lower-yielders, especially since SNB intervention doesn’t appear to be much of a concern these days.

Last Week’s Price Review

The Euro

The euro is the third weakest currency as of 2 pm GMT. And price action on the euro looks rather chaotic on first glance. Heck, there are even clear signs of diverging price action, which implies 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

But what happens if we simply remove EUR/NZD?

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

Well, the euro’s price action is still actually rather chaotic. However, we can see that the euro did tilt broadly to the downside on Wednesday and early Thursday.

And if we put Wednesday’s downside tilt within the context of last week’s closing prices (dashed horizontal line), we can see the broad-based bearish pressure on Wednesday is the reason why the euro is a net loser this week.

As for catalysts, there weren’t really any major negative catalysts at the time.

In fact, there was goods news on Wednesday since German Chancellor Angela Merkel’s Christian Democrats (CDU) and Christian Social Union (CSU) allies were finally able to hammer out a coalition deal with the center-left Social Democratic Party (SPD) under Martin Schulz.

This should have removed some political uncertainty. However, there were still lingering worries because Merkel and her allies’ own authority were eroded before SPD was finally convinced to play along.

Moreover, the SPD members still have to vote on whether or not to accept the deal, so the deal is not yet set in stone. And for future reference, the SPD members are slated to vote from February 20 to March 2, with a decision expected by March 4.

Aside from lingering political uncertainty related to the SPD vote, some market analysts also blamed the euro’s broad-based slide on news that Hamburg Mayor Olaf Scholz is slated to be the next German Finance Minister since the market was supposedly expecting SPD Leader Martin Schulz to take that position.

You see, Schulz is supposedly fiscally hawkish and is more flexible. In contrast, Scholz is a relatively unknown figure and is more likely to be a fiscal conservative. And that’s a source of uncertainty.

Whatever really caused the euro to slide on Wednesday and early Thursday, the fact remains that the broad-based slide is the reason why the euro had a bad run this week.

The Swiss Franc

The euro is a net loser for the week, but the Swissy is turning in a more mixed performance (as of 2 pm GMT).

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

So, are the euro and Swissy still dancing in tandem? Well, yes… for the most. However, the Swissy clearly decoupled from the euro on Monday and Thursday, as you can see in the sample pairs below. Heck, the Swissy even resisted the mighty yen.

As to why the Swissy decoupled from the euro, that was very likely because of safe-haven demand for the Swissy given the intense risk aversion on Monday and Thursday.

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