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The Euro

Overlay of EUR Pairs: 1-Hour Forex Chart
Overlay of EUR Pairs: 1-Hour Forex Chart

European Headlines and Economic data

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

Overlay of CHF Pairs: 1-Hour Forex Chart
Overlay of CHF Pairs: 1-Hour Forex Chart

Switzerland Headlines and Economic data

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.

Overlay of CHF/USD vs. EUR/USD: 1-Hour Forex Chart
Overlay of CHF/USD vs. EUR/USD: 1-Hour Forex Chart
Overlay of CHF/JPY vs. EUR/JPY: 1-Hour Forex Chart
Overlay of CHF/JPY vs. EUR/JPY: 1-Hour Forex Chart