European Headlines and Economic data
- German Ifo business climate rises sharply in March on strong domestic demand
- German consumer sentiment to face setback: GfK
- Draghi says the ECB stands ready to act and could delay a rate hike again
- Euro zone bond yields hold near multi-year lows on ECB rate tiering talk
- Annual growth rate of broad monetary aggregate M3 increased to 4.3% in February 2019 from 3.8% in January
- Germany sells Bunds at negative yield for first time since 2016
- Euro-Area Sentiment Drops for Ninth Month Amid Bleaker Outlook
- German inflation slows in March, dropping further below ECB goal
- German retail sales rise more than expected in February
- ECB Chief Economist on German Bunds, German Economy, Brexit
Major Market Drivers for the Euro
We saw mixed price action from euro pairs by the end of the week due to counter currency drivers, but looking at the one hour chart overlay above, it’s pretty easy to see a generally negative lean on the euro this week.
On Monday, we saw a little bit of early week support after the German Ifo survey data (rising to 99.6 vs. 98.5 forecasts) provided a glimmer of hope for the European economy. Unfortunately for euro bulls, that was the peak of the week of bullish sentiment as the Gfk consumer survey data showed that economic sentiment in Germany could fall in April. This didn’t spark an immediate bearish reaction in euro pairs, but it looks like the bulls were no where to be seen as economic fears were starting to be priced into the euro and bond markets from this point on.
On Wednesday, we got another signal that the European Central Bank is concerned about the economic look during their various speeches in Frankfurt. The highlight of the event were the talks of interest tiering for European banks on deposit rates with the ECB, to help alleviate the pressure of negative interest rates in case there is another economic downturn. While this basically is a stimulative measure, it does contribute to the story that there are headwinds likely facing the European economy. After an initial pop on the event, the euro fell broadly on the economic concerns, and likely on the fact that German 10-yr bund yields fell this week to negative for the first time since 2016:
There was no relief for euro bulls going into the end of the week as Eurostat sentiment data also signaled that confidence is waning in Europe (business climate 0.53 vs. 0.69 previous, industrial sentiment -1.7 vs. -0.4 previous) on Thursday. And on Friday, the final round of bearishness came after a slew of German and French economic updates, which were mixed as German retail sales and unemployment were upbeat, versus a weaker-than-expected update on German import prices, French consumer spending and government budget.
The Swiss Franc
Switzerland Headlines and Economic data
- SNB Quarterly Bulletin: maintaining its expansionary monetary policy, global economic activity has weakened, the SNB continues to expect Swiss GDP to expand by around 1.5% in 2019
- SNB’s Maechler sticks to loose policy as franc hits 20-month high
- KOF Economic Barometer rises to 97.4 in March 2019
Major Market Drivers for the Swiss Franc
As usual, no top tier catalysts on the economic calendar for the Swiss franc, and no significant uniform moves can be seen on the one hour overlay chart of Swiss franc pairs above.
We did get commentary from Swiss National Bank governing board member Andrea Maechler this week, who re-iterated the party line of the SNB once again that the franc remains highly valued and that there are currently no expectations to change its policy of currency interventions and negative interest rates. And the latest KOF economic barometer read bounced higher in March to 97.4 from 93.0 in February, both of which are still below the average of 100.56 index points from 1991 to present.
Again, no major reaction from the events which makes the odds pretty high that Swiss franc price action was tied to the euro and other counter currency events. We can see the correlation with the euro below held pretty close to one once again, but the Swiss franc did out perform the euro in the latter half of the week due to the driving catalysts explained in the euro recap above.