Major Market Drivers for the Euro
Price action was mixed among the euro pairs this week as they were driven mainly by broad risk sentiment and counter currency themes. Risk sentiment was mostly negative for the week, likely starting with negative Chinese GDP data (slowest growth pace since 1990), followed by weak data from Europe, and possibly on news that US cancels trade planning meeting with China prompting traders to retreat to “safe haven” assets like bonds and lower yielding currencies. Risk sentiment is likely the reason why we saw the euro outperform the Aussie and Loonie while generally track the yen, franc, and U.S. dollar up until Friday.
But we did see a few hours where the focus was on the euro, and that started on Thursday during the euro session as European flash PMI reads came in below expectations, with contractionary conditions in Germany being a big surprise. Understandably, the euro sold off broadly on signs from the business community that slowing conditions will likely persist going forward.
And just a few hours later, the euro was the focus once again with the latest monetary policy statement from the European Central Bank and the follow up press conference. The key takeaways from the event include a downgraded outlook on economic growth due to geopolitical factors and a reaffirmation of keeping key interest rates at present levels through the summer of 2019 and “longer, if necessary.” You can read more of Draghi’s comments from the ECB press conference here.
These comments likely sparked speculation that the ECB will likely push back any tightening policies, prompting forex traders to take all euro pairs to the downside uniformly for the next several hours. It wasn’t too long though that risk sentiment and counter-currency themes took over euro pair price action once again into the close of the week, this time swinging into risk-on mode after positive U.S. tech sector earnings, signs of the U.S. government shutdown to end (which did take place Friday afternoon), and the possibility of the Fed coming close to ending its balance sheet reduction program likely had traders shedding their safe haven bets into the weekend.
Euro Headlines and Economic data
- German PPI down 0.4% in December
- German ZEW Economic Sentiment Improves Unexpectedly in January
- Euro zone consumer confidence improves to -7.9 in January
- German Manufacturing PMI Sinks to 4-Year Low in January
- ECB leaves interest rates unchanged amid weak growth in the region
- Draghi comments at ECB press conference
- Brexit, trade disputes put German economy on downturn slope: Ifo
- ECB survey sees slower growth and inflation
- As dismal data flows, ECB policymakers promise caution
The Swiss Franc
Major Market Drivers for the Swiss Franc
Switzerland lacked economic data reports this week and while there were comments from members of the Swiss National Bank this week, none were market movers for the franc. So as usual, Swiss franc movements were influenced by global risk themes, counter-currency themes, and as usual moving pretty much in lockstep with the euro, with exception to the price action during the European PMI data release and the European Central Bank press conference in which the euro under performed, highlighted below: