Both currencies outperformed early this week on net negative global risk sentiment, but biases diverged on the euro and Swiss franc after a few geopolitical shocks by the end of the week.
European Headlines and Economic data
- German exports rise in October, imports flat for a balance surplus of 20.6B euros
- The sentix overall index for Eurozone rises by 5.2 points to +0.7 points. The expectation values reach the highest level since March 2018!
- A contributor to the euro’s early week strength may have come from global risk sentiment influences, which was leaning negative after headlines from China that included:
- French industrial production up +0.4%, beating forecasts of +0.3%
- Italian industrial production down in October by 2.4% y/y, down 0.3% m/m
- German ZEW economic sentiment index rises sharply to 10.7 in December vs. -2.1 previous
- A small pop in euro strength during the U.S. trading session on U.S. dollar weakness after the FOMC signals no potential rate hikes until we see sustained inflation growth.
- German Consumer prices in November 2019: +1.1% y/y
- In November 2019, the prices of frequently purchased goods in France rose by 0.1% in hyper and supermarkets
- In the Q3 2019 Italian employment was stable compared with the last three months
Industrial production down by 0.5% in euro area
Down by 0.4% in EU28
- ECB keeps generous stimulus unchanged in Lagarde’s first meeting
- ECB tweaks economic projections
- ECB holds rates steady at Lagarde’s debut policy meeting
- The euro really gets moving (rallying against most majors) after the U.K. general election that resulted in a very big win for the Conservative Party, which likely meant less uncertainty on the future of Brexit.
- German Wholesale selling prices -0.1% m/m; -2.5% y/y
- EU welcomes Brexit clarity from Conservative victory
- ECB’s de Guindos says British election results eliminate uncertainty
- German Industry Slump Set to Cast Shadow on Economy Through 2020
The Swiss Franc
Swiss Headlines and Economic data
- Much like the euro above, without any major catalysts from Switzerland or the Euro area, a contributor to the franc’s early week strength may have come from global risk sentiment influences, which was leaning negative after headlines from China mentioned above in the euro recap.
- Global risk sentiment starts to improve for the week on speculation that the U.S. and China are planning to delay the December tariffs, correlating with a broad move lower in the Swiss franc, but like the euro above, we saw a bit of pop higher after the USD bearish FOMC monetary policy statement.
- Swiss economy expected to brighten only in 2021: SECO
- Swiss Producer and Import Price Index fell by 0.4% in November 2019
- Swiss National Bank indicates negative rates to stay for long haul
- Swiss National Bank leaves expansionary monetary policy unchanged
- Big jump in positive global risk sentiment during the afternoon U.S. trading session after Trump Signs off on China trade deal to avert December tariffs. The big Conservative Party win in the U.K. general elections likely brought in some risk-on sentiment as Brexit uncertainty waned. Both events were likely the drivers for the franc’s broad move lower during the U.S. trading session.
- A little bit of pullback in global risk optimism as details of the newly formed U.S.-China trade agreement were a little bit disappointing (only 50% of the $112B in tariffs would be rolled back and China agreed to buy $32B in additional agricultural goods over the next two years, conflicting with Trump’s claims of $50B in agricultural purchases. This correlates somewhat with a broad move higher in the franc against the majors during the European and U.S. trading sessions.