The Euro
European Headlines and Economic data
- German consumer sentiment seen stable: GfK
- The annual growth rate of the broad monetary aggregate M3 decreased to 3.8% in Jan. 2019 from 4.1% in Dec. 2018
- Weidmann Says Market View on ECB Rates Plausible Amid Weak Data
- German Consumer prices rise 1.6% y/y in February 2019
- German Import prices rise 0.8% y/y in January 2019
- German Retail Sales Rebound Tops Expectations; Biggest In Over 2 Years
- Eurozone manufacturing sector contracts in February
Major Market Drivers for the Euro
Another mixed bag of nuts for euro pairs this week. Euro traders had a heavy economic calendar from Europe to work with, but unfortunately it was filled with low tiered events that after a little bit of review, seemed to have failed to spark any significant uniform market reactions that we could see. But an argument that Europe catalysts did spark a move can been seen on Friday. We saw euro pairs moved higher after a heavy batch of European data, mostly leaning positive as German retail sales and unemployment data possibly outweighed the slew of contractionary PMI reads and weaker-than-expected core flash CPI. Overall, it was a quiet week of headlines from Europe, which suggests that euro pairs were mostly influenced by global risk sentiment and counter currency flows.
Global risk sentiment was on the upswing this week, and for a quick rundown of what drove global risk sentiment, check out my review of this week’s drivers and broad market behavior in my Japanese yen weekly review here. In short, it was mostly a risk-on kind of week thanks to positive geopolitical developments (U.S.-China trade negotiations and Brexit update) and another confirmation of central banks holding off on tightening with Fed Chair Powell’s testimony to the U.S. Congress (re-iterating policy “patience” and a likely end to the balance sheet runoff this year). The positive Brexit update of British PM Theresa May opening up to the possibility of a Brexit extension likely brought support to the euro as we can see in the euro pair overlay chart above, as any reduction of odds for a “no-deal” Brexit scenario is seen as positive by traders for both Europe and the U.K.
As far as counter currency flows, the comdolls had an off week thanks to the oil markets and economic data hurting the Canadian dollar and geopolitical/economic concerns from the Asia region dinging the Kiwi and Aussie. And obviously Sterling was the lone winner against the euro thanks again to the big news of Theresa May giving lawmakers the choice of a Brexit no-deal or a short delay.
The Swiss Franc
Switzerland Headlines and Economic data
- The Swiss trade surplus narrowed to CHF 1.39 billion in January 2019 from a marginally revised CHF 1.76 billion in the previous month
- The KOF Economic Barometer dropped to a reading of 92.4 from 96.2 in January (revised from 95.0)
- Swiss Retail Sales Unexpectedly Decline For Third Month
- The procure.ch Purchasing Managers’ Index (PMI) climbed 1.1 points and closed at 55.4 points
- Swiss more gloomy about 2019 even as Q4 produced growth
Major Market Drivers for the Swiss Franc
The Swiss franc was a net winner this week, but it couldn’t have been on the latest economic updates from Switzerland as we saw mostly negative headlines including a trend lower in retail sales, a weaker-than-expected read on GDP, a narrowing trade surplus and on sentiment on the economy declining based on the KOF economic barometer.
So it’s once again all about tracking the euro, which can be clearly seen in the EUR vs CHF charts below against the Japanese yen and U.S. dollar. The moves are nearly perfectly correlated and the euro did outperform, likely on support from the positive Brexit news mentioned earlier.
