The shared currency’s schedule is looking particularly light this week, but it has been mostly non-calendar events that have been pushing it around lately.
These non-calendar events I’m referring to are the ones going on in Turkey lately as many market watchers are buzzing about a potential spillover to the euro region.
Although much of the risks are concentrated on the emerging markets, note that Spanish, Italian, and French banks are exposed to Turkish debt. Expectations of a recession and a financial crisis in the country could prove troubling for these institutions and could keep dampening investor confidence in the euro zone overall.
Overall risk sentiment
As in the previous weeks, market sentiment could play a greater role in pushing European currencies like the euro and franc around more than actual economic data.
It’s helpful to note that the euro and the franc tend to benefit from safe-haven flows, especially when traders are hesitant to bet on the U.S. dollar. After all, trade tensions with China could still keep uncertainty looming over U.S. businesses and investors might be better off putting their funds elsewhere.
Last Week’s Price Review
The euro is currently mixed for the week (as of 1 pm GMT). The euro is a net loser at the moment, though, so the euro may soon mark its third week of net losses.
And like last week, the euro was mostly on the receiving end of the Greenback’s strength, although Turkey-related worries also helped to drag the euro lower on Friday.
The euro had a steady start but began to find buyers when Tuesday’s London session rolled around.
There were no apparent catalysts, but I noted in Tuesday’s London session recap that some market analysts were suggesting that the euro may have been feeding off the Greenback’s weakness at the time.
And that seems like a plausible reason since the euro’s price action became more mixed when the Greenback finally regained its footing during Wednesday’s London session.
In fact, the euro even began to show signs of weakness (except against GBP) as the Greenback continued to gain strength.
The Greenback did eventually encounter sellers again during Wednesday’s U.S. session, so the euro’s price action became mixed again.
However, selling pressure would plague EUR pairs (except EUR/AUD and EUR/NZD) come Thursday, likely because safe-haven flows were making their way to the Swissy, the yen, and the Greenback (at the euro’s expense).
After that, it was then downhill for most EUR pairs (except EUR/AUD).
And as a final parting shot, the euro also got swamped by sellers when the Financial Times released a report during the late Asian session, which claimed that ECB members were getting worried about the exposure of E.U. lenders to the ongoing troubles in Turkey, which may lead to a contagion effect in the Euro Zone.
The Swiss Franc
The Swissy is turning in another impressive performance this week since it’s currently the second top-performing currency of the week (as of 1 pm GMT). What’s even more impressive is that the Swissy will soon mark its fourth consecutive week of net wins.
EUR and CHF pairs still have roughly similar price action. But as you can see in the sample pairs below, the euro initially had the upper hand when the Greenback was on the back foot and risk-taking prevailed.
However, the tide of battle shifted in favor of the Swissy on Thursday, which is when risk aversion ramped up and the Greenback began to trade broadly higher.
Moreover, EUR and CHF pairs decoupled on Friday since the Financial Times report apparently weakened the euro but gave the safe-haven Swissy a nice boost and even enabled the Swissy to fight off the yen and the Greenback.