The Euro

European Headlines and Economic data
- Auto woes drive dip in German industrial output
- German government lowers GDP forecast again – Handelsblatt
- Germany January trade balance €14.5 billion vs €15.2 billion expected
- Coeure Says ECB Not Reversing Course on Policy With New Package
- Industrial production up by 1.4% in euro area
- Compared with January 2019, Germany’s consumer price index rose by 0.4% in February 2019
- In February 2019, French consumer prices were stable over one month and rose by 1.3% year on year
- ECB must rethink policy framework after failing to lift inflation: Rehn
Major Market Drivers for the Euro
Looking at the one hour chart overlay of euro pairs above, it’s probably agreeable by most that there was little to no uniform behavior this week. This is understandable as the European economic calendar was void of top tier, market moving events, and the low tier updates we did get were mixed as German data disappointed versus an improvement in European industrial production and French jobs data. So it’s safe to say that euro price action was driven mainly on counter currency movements and global risk sentiment.
Global risk sentiment was leaning towards positive for a good chunk of the week, arguably influenced by several factors including positive surprises from this week’s top tier global economic reports (most notably a bounce back in U.S. retail sales and the latest U.K. GDP report) and likely from the latest Brexit developments (no-deal Brexit rejected; Brexit extension supported; signs of deal still being worked on between DUP and U.K. government). We also got positive signs from the ongoing U.S.-China trade situation and the potential stimulus moves as China plans to reform its foreign investment laws and vows new tax cuts. Risk sentiment is likely the factor for why we saw the euro out perform the safe havens (USD and JPY) more than its performance against the rest of the majors.
As for counter currency movements, you can check out the links above to the other currencies for their reviews, but we’ve got to touch upon the British pound as events in the U.K. arguably gave the euro some support. In short, this week we saw the U.K. Parliament reject Theresa May’s Brexit deal, vote against a no-deal Brexit, and vote to extend Brexit, sparking large moves in the British pound. We think these series of events lowers the probability of a no-deal Brexit once again (at least for the time being), a situation that would likely be disastrous for the EU as it would be for the United Kingdom. And this is likely why the euro was relatively supported higher this week, despite continued signs of economic weakness and the ECB announcing new stimulus measures just last week.
The Swiss Franc

Switzerland Headlines and Economic data
- Swiss government cuts 2019 GDP growth forecast again
- The Producer and Import Price Index increased in February 2019 by 0.2% compared with the previous month, reaching 101.9 points
Major Market Drivers for the Swiss Franc
The economic calendar for Switzerland was almost non-existent once again, only giving traders an update on the Swiss government’s outlook on GDP and the latest producer and import price data. They were released within an hour from each other and neither seemed to have sparked a uniform or extended move among Swiss franc pairs.
Once again, franc price action was once again lead by counter currency flows, mainly by the euro Switzerland’s closest trading partner. Compare the euro overlays chart with the franc overlays chart and you’ll see that the correlation was pretty close to one once again, but the euro did outperform the franc, likely on support from the Brexit developments leading to the avoidance of a no-deal Brexit for now. And likely on the global risk sentiment factor as the risk-on lean for the week (quickly covered in the euro review) which probably had traders lightening up on the “safe haven” currencies like the Swiss franc, pushing it to net loser status at the close of Friday.

