If there’s anything we’ve learned from previous euro price action, it’s that the lack of economic calendar events don’t exactly mean an uneventful week!
On top of keeping tabs on dollar action and overall market sentiment, here’s what else you should watch out for.
Bundesbank President Weidmann’s speech (Sept. 3, 5:15 pm GMT)
Remarks from euro zone officials have led the shared currency to move this way and that last week, so it might help to pay extra close attention to this one coming up from German central bank head Jens Weidmann.
In fact, his speech is called “Higher growth, lower inflation? – The digital transformation from the central bank” at the German Economic Association’s Annual Conference, so there could be some monetary policy gems in his remarks.
More leading indicators (Sept. 7, starting 6:00 am GMT)
Although low to medium-tier data haven’t been pushing the euro around in a particular direction lately, it’s good to keep tabs on how the numbers turn out since these provide clues on how overall performance would fare.
In particular, keep a lookout for German and French industrial production data and trade balance. Italy is also slated to print its retail sales figures while the entire region is awaiting its revised GDP reading for Q2.
Eurogroup meetings (starting Sept. 7)
Brexit has been the talk of the town these days, so it’s likely this little topic will come up in the meetings between finance ministers from all over Europe later in the week.
One other thing that might come up is the possibility of the EU retaliating to U.S. tariffs on European cars, to which franc bulls might charge on a combination of euro weakness and risk aversion.
Apart from that, market participants are also eager to hear these officials’ thoughts on Turkey’s financial troubles and if the threat of contagion in the greater European area is real. Quite a lot on the agenda, huh?
Last Week’s Price Review
The euro was outpaced by the yen and is now mixed for the week (as of 1 pm GMT). The euro’s still a net winner, though. And if the euro can maintain its ranking, then the euro may soon be marking its third consecutive week of net gains.
The euro’s price action looks rather chaotic and there are even clear instances of diverging price action on EUR pairs, which implies that the euro was somewhat vulnerable to opposing currency price action.
However, if we remove EUR/GBP, then we can see that the euro’s price action was actually somewhat uniform. The euro’s price action did become a bit messed up by Thursday, though.
Anyway, the euro showed its usual vulnerability to the Greenback’s price action. And since the Greenback initially showed strength, the euro ended up being on the receiving end of some selling pressure during Monday’s Asian session.
The euro’s fortunes began to turn (for the better) during Monday’s London session, though, since the Greenback’s strength began to waver. Moreover, it looks like the euro attracted some buyers when Ifo’s German Business Climate Index surprised to the upside by coming in at 103.8 (101.9), which is the best reading in six months.
The Greenback then continued to stumble about on Tuesday, and the euro happily fed off the Greenback’s weakness. The euro did have a harder time against the Swissy and the Loonie, though, since safe-haven flows likely gave the Swissy an extra boost, while the Loonie was well-supported by progress in trade talks.
The Greenback regained its footing during Tuesday’s U.S. session, however, so the euro’s rally stalled and most EUR pairs began to eventually tilt to the downside as the Greenback continued to strengthen.
The euro then got a noticeable bearish kick on Wednesday. And as noted in Wednesday’s London session recap, that was apparently due to a La Stampa report that claimed that the Italian government supposedly wants the ECB to support Italian bonds (via QE) to dissuade speculation and protect Italian bonds from ratings downgrades.
However, the euro would later perk up again when Italian Deputy Prime Minister Luigi Di Maio denied the La Stampa report during Wednesday’s U.S. session.
The euro then traded roughly sideways on most pairs before encountering some selling pressure during Thursday’s London session. And as pointed out in Thursday’s London session recap, that was apparently a reaction to Germany’s poor inflation report (1.9% vs. steady at 2.1% expected).
However, most EUR pairs were already encountering some selling pressure before that. And that may have been due to German Finance Minister and Vice Chancellor Olaf Scholz since he warned in his speech that business in the E.U. should prepare for a disorderly Brexit since Scholz is not sure if the E.U. and the U.K. will have a meeting of the minds.
Moving on, the euro then moved lower after that before eventually finding support. There was no apparent reason, however.
In any case, the euro began to slip later on thanks to a Bloomberg report wherein Trump Trump was cited as saying that the E.U.’s trade policies are supposedly “almost as bad as China,” adding that the E.U.’s proposal to scrap auto tariffs is just “not good enough.”
The euro’s price action then became more mixed during Friday’s Asian session.
However, selling pressure returned during Friday’s London session. And as noted in Friday’s London session recap and as marked on the overlay of EUR pairs, the euro began to wobble when Juncker warned that the E.U. will retaliate against U.S. tariffs on European cars. And more sellers joined the fray just before Euro Zone’s HICP report failed to meet the market’s expectations.
All that selling pressure wasn’t enough to erase the euro’s gains against AUD, NZD, CAD, and USD, so the euro’s is still a net winner.
The Swiss Franc
The Swissy’s is following up last week’s good performance with an even better performance since the Swissy is currently at the head of the forex pack (as of 1 pm GMT).
As usual, EUR and CHF pairs had roughly similar price action. However, the Swissy began outpacing the euro on Wednesday.
And it all started when the euro got kicked lower because of the La Stampa report, but the Swissy didn’t seem to mind the La Stampa report too much.
Moreover, Scholz’s comments apparently gave the Swissy a lift, while Germany’s CPI report didn’t have as much of a negative effect as it did to the euro.
Also, the Bloomberg report and Juncker’s comment actually gave the Swissy a boost while kicking the euro lower, which widened the gap between the two.
In short, the Swissy is this week’s champion because it tracked the euro higher when the euro had a bullish run, while also feeding off the euro’s misery whenever trade-related news that are detrimental to the Euro Zone popped up.