The Euro
European Headlines and Economic data
- Euro zone investor morale improves on hopes of Asian tailwind – Sentix
- Euro Zone PPI Rises 0.4% in January
- Volume of retail trade up by 1.3% in euro area
- Eurozone records modest improvement in growth – IHS Markit Composite PMI
- Eurozone GDP growth falls below expectations confirming sluggish 2018
- ECB pushes back rate hike plans, announces fresh funding for banks
- German Manufacturing Orders Slump in Sign of Deepening Gloom
Major Market Drivers for the Euro
It was a busy economic calendar from Europe that painted a picture of improvement through updated reads on services PMI’s, investor confidence, retail sales data, and industrial production. They mostly showed better-than-expected updates on the economy, especially with PMI’s back above the 50 expansionary/contractionary level. That didn’t seem to have any sway on the euro, though, as it remained under pressure against the majors for most of the week, likely due to a couple of factors.
First, we think the declining optimism on the Brexit situation possible had traders lightening up on euros as speculation grew that a deal would be highly unlikely ahead of the big Brexit vote this week. Negotiations between the British government and European Union apparently didn’t go well at all, prompting traders to start raising the odds of the worse case scenario of a no-deal Brexit again–a situation that would be disastrous for both the U.K. and EU.
Second, it’s likely traders pared their euro long bets, or maybe even initiated short bets ahead of the European Central Bank monetary policy statement. Expectations were for the ECB to come out with dovish rhetoric on the economy given how data has been weakening over the past couple of months. Well, traders got that and a whole lot more as the ECB not only lowered growth forecasts, but they initiated a new round of targeted longer-term refinancing operations (TLTRO), or cheap loans to euro area banks. This new round of stimulus sparked a sell-off as expected any surprise stimulus actions would typically do, pushing most euro pairs into the red for most of the week and the euro as the second biggest loser among the major currency pairs.
The Swiss Franc
Switzerland Headlines and Economic data
- The Swiss National Bank (SNB) reports a loss of CHF 14.9 billion for the year 2018
- Switzerland’s consumer prices rose 0.4% in February 2019, reversing a -0.3% drop in January
- Swiss Jobless Rate Unchanged In February
- Foreign Exchange Reserves in Switzerland decreased to 738B CHF in February from 742B CHF in January of 2019
Major Market Drivers for the Swiss Franc
Switzerland’s economic calendar was once again extremely light with only low tier data points on tap, and the headlines were non-existent with exception to the news that the Swiss will get a new 1,000 CHF note…fancy!
So it’s no surprise that franc price action was once again dictated by the currency of Switzerland’s closest trading partner, the euro. Compare the euro overlays chart with the franc overlays chart and you’ll see that they’re almost identical.
And looking at the chart overlays of the CHF vs. EUR against the Greenback and yen below, we can see a near one correlation through out the week. Understandably, the euro under performed the franc, especially after the aforementioned dovish ECB event, and its likely the broad risk-off sentiment seen globally this week likely gave the franc a little bit of support given the “safe haven” status it is anointed by traders.
