European Headlines and Economic data
- Euro area international trade in goods surplus €1.5B
- German investors cheered by hopes of Brexit delay, trade progress
- Europe manufacturing PMI signals deeper slowdown
- Macron: UK heading for no-deal Brexit if MPs reject May’s plan
- Flash consumer confidence remained stable in both the euro area (-7.2) and the EU (-7.1)
- U.K. Gets Brief Extension To Withdraw From E.U. As ‘Cliff-Edge’ Date Delayed
Major Market Drivers for the Euro
For most of the week, euro pairs saw low volatility, directional movement was influenced mostly by counter currency drivers, and relative performance between euro pairs was dictated by global risk sentiment.
Global risk sentiment went into aversion move this week, likely driven by the ongoing Brexit drama (didn’t get the longer Brexit extension), a potential snag in the U.S.-China trade negotiation story (U.S. negotiators seeing China push back on trade vows; Trump-Xi meeting postponed), and growing fears of a global growth slowdown which was capped off with the latest European PMI data sparking fear into the weekend.
On Friday, the manufacturing and services survey data signaled a high probability that the first and second quarter economic numbers will likely disappoint, fueling not only a move lower in risk assets (and the reason why we saw the safe havens peform the best against the euro) but also the only uniform move between euro pairs on the week–the big drop on Friday during the morning London session.
The Swiss Franc
Switzerland Headlines and Economic data
- Swiss National Bank leaves expansionary monetary policy unchanged (sight deposits at -0.75%, three-month Libor target range between -1.25% to -0.25%
- Dovish Swiss National Bank raises global trade and Brexit worries
Major Market Drivers for the Swiss Franc
It was another quiet calendar for the Swiss franc this week with out two events on the docket: the Swiss trade balance report (Swiss trade surplus widened to CHF 2.04 billion in February) and the Swiss National Bank’s latest monetary policy decision (no change to monetary policy as seen above). Both were volatility duds as expected, so it’s likely that price action was influence more this week by the euro as usual and the rise in global risk aversion sentiment as described above in the euro recap.
This likely explains why that while the franc did correlate with euro as always, it also outperfomed the euro this week, especially as risk aversion sentiment started to grow and peaked at the end of the week with the European PMI update. It actually closed the week up against the majors thanks to the risk off sentiment, with exception to the Japanese yen, who tends to be the big winner in risk-off environments.