The euro was knocked down early by business sentiment data and never recovered, possibly on worsening sentiment on the Brexit drama. As for the Swiss franc, it saw choppy action on global risk sentiment moves, ultimately ending net positive with a surprise negative headline to close out the week.
European Headlines and Economic data
- IHS Markit Flash Eurozon PMI falls in September further into contractionary territory to 45.6 vs. 47.0 in August.
- German Composite PMI sinks to lowest since October 2012
- Euro zone economic rebound not in sight: ECB’s Draghi
- ECB’s Knot: New economic stimulus program ‘disproportionate’
- Draghi says ECB should examine new ideas like MMT
- German consumers see rosier picture for October after ECB package – GfK survey
- ECB Economic bulletin: “the outlook for euro area real GDP growth has been revised down for 2019 and 2020”
- Annual growth rate of broad monetary aggregate M3 increased to 5.7% in August 2019 from 5.1% in July
- Despite some positive economic updates from Europe, the euro saw broad weakness, starting in the London trading session and thru the end of Thursday trade. It’s possible this could be due to rising no-deal Brexit fears as the U.K. and EU don’t seem to be any closer to a deal, and/or rising global risk-on sentiment after China says in close communication with U.S. over October trade talks
- Confidence in Europe’s economy hits a 4-year low amid fears about Brexit and Trump’s trade war
- French consumer spending unexpectedly stalls in August
- Economic Sentiment Indicator (ESI) decreased markedly in both the euro area (by 1.4 points to 101.7) and the EU (by 1.4 points to the long-term average of 100.0)
- Jean-Claude Juncker: A no-deal Brexit would be Britain’s fault
The Swiss Franc
Swiss Headlines and Economic data
- The Swiss franc spiked higher on Monday, likely on early global risk-off sentiment to start the week. This may have been sparked by a combination of headlines pointing to a weakening global economy (Korea Exports Dent Optimism Over Global Tech Demand Recovery) and on the possibility of a longer time horizon for the Saudi oil facilities to get back on line.
- The Swiss franc saw short-term strength during the U.S. trading session, possibly on another round of risk aversion sentiment after we saw more negative developments from the U.S.-China trade story (Mnuchin appears to surprise Trump about request to cancel China visit to US farms, Donald Trump attacks China on trade and urges restraint on Hong Kong protests in speech to UN General Assembly).
Swiss National Bank releases Quarterly Bulletin:
- Adjusts basis for calculating negative interest
- Will remain active in foreign exchange market as necessary
- Views Swiss franc as highly valued
- Nothing new on this release, not a market mover for the Swiss franc
- The franc saw broad weakness during the U.S. trading session despite no direct catalysts from Europe and Switzerland. The argument could be that it fell with risk sentiment shifting away from negativity after a round of extreme geopolitical risk sentiment from early in the week.
- White House deliberates block on all US investments in China – this surprise announcement shook up global risk sentiment as the idea weakened the prospects of a trade deal between the U.S. and China, sending traders back into safe havens like CHF into the weekend, but unfortunately not enough to get it in the green against all of the majors.