With Germany and Spain already out of the World Cup and with no major catalysts on sight, can the euro score a few more goals this week?
More trade tensions?
Over the past couple of weeks, it seems that the euro is able to take advantage of trade troubles in the U.S. possibly because the bloc is drafting up deals of its own with China. It looks like those luxury European cars have somewhere to drive off to!
Another round of trade-related headlines this week could then continue to influence euro movements, even if the action isn’t necessarily happening within the bloc.
Of course this could also push franc pairs around, as the lower-yielding Swiss currency has shown a knack for snatching away risk-off flows from the dollar.
Last Week’s Price Review
The euro was the third best-performing currency last week and it’s the third best-performing currency again this week (as of 1 pm GMT), so the euro is apparently on track for its second week of net wins.
The euro had a mostly strong start on Monday. And as noted in Monday’s London session recap, it’s possible that the euro may have been lifted by positive trade-related reports concerning trade deals between China and France.
At any rate, the euro’s rally lost steam by the time Monday’s U.S. session rolled around. The the euro then began to trade mostly sideways before tilting broadly lower come Wednesday.
There weren’t really any negative catalysts for the euro on Wednesday, but as noted in Wednesday’s London session recap, market analysts were blaming the euro’s slide on the Greenback’s strength, the trade spat between the E.U. and U.S., political troubles in Germany, and uncertainty ahead of the E.U. Summit.
The euro eventually found support on Thursday. In fact, euro pairs even began to tilt broadly to the upside when Thursday’s London session rolled around. And as I pointed out in Thursday’s London session, that was apparently due to net positive inflation reports for Spain, Italy, and Germany, which hinted that inflation for the Euro Zone as a whole may have picked up.
In hindsight, however, it’s also possible that the euro bears who shorted on Wednesday may have been covering their shorts ahead of the E.U. summit’s conclusion.
Speaking of the E.U. Summit, word hit the wires on Friday that E.U. members agreed on a migration deal, which caused the euro to spurt higher against everything except the Aussie.
Anyhow, there was little follow-through buying after that, but the euro did get a final bullish kick (except against the pound and Swissy) when the Euro Zone’s inflation report was released during Friday’s London session since the headline HICP reading for June came in at 2.0% year-on-year, which is already well above the ECB’s forecast that headline HICP will increase by 1.7% year-on-year in 2018, as reported in the June Eurosystem/ECB Staff Macroeconomic Projections.
The Swiss Franc
The Swissy was knocked of its perch since it was the top-performing currency last week, but is turning in a more mixed performance this week (as of 1 pm GMT). The Swissy is still a net winner, though.
Looking at the overlay of CHF pairs above, it seems like the Swissy’s price action was a chaotic mess. However, the sample pairs below show that EUR and CHF pairs still had roughly similar price action.
It’s obvious, though, that the Swissy didn’t get as much buyers on Monday when positive trade-related news helped to push the euro higher.
The Swissy also didn’t get as much lift from the net positive inflation reports on Thursday. And the same can be said of the E.U. migration deal on Friday.
The Swissy did get a bigger bullish boost during Friday’s London session, though. And as noted in Friday’s London session recap, that was due to Swiss Finance Minister Maurer’s comment that:
“At the moment, the short-term relationship between the Swiss franc and the euro is no problem.”