The Coronavirus pandemic pushes the world to take on extreme measures to stop the spread, but likely damaging the global economy in the process and sending traders into extreme fear mode. The euro and Swiss franc came out mixed this week as the usual risk sentiment behavior played its role (tending to strengthen in negative environments), falling only to the Greenback and yen this week.
European Headlines and Economic data
- No major European headlines or data on the session, so the likely driver was the big risk aversion day as traders priced in the growing probability of a big hit to the global economy by the coronavirus pandemic; now realized after U.S. President Donald Trump said the U.S. economy “may be” headed for recession. As usual, the euro benefited from the risk aversion environment, starting the week up against the major currencies (with exception to the yen and Swiss franc) despite the latest stimulative actions announced by the Bank of Japan, the Federal Reserve and the Reserve Bank of New Zealand.
- The ZEW research institute’s monthly survey showed economic sentiment among investors collapsed to -49.5 from 8.7 in February – “A separate gauge measuring investors’ assessment of the economy’s current conditions decreased to -43.1 from -15.7.” The euro reacted negatively on this data against the USD and JPY, while remaining stable against the comdolls in a risk aversion environment.
- German regulators slash capital requirements to boost bank lending
- ECB’S Holzmann: Monetary policy still has further to go
- ECB’s de Guindos says effects from coronavirus could last for weeks or months
- Euro area international trade in goods surplus €1.3B in January; €2.6B deficit for EU27
- Annual inflation down to 1.2% in the euro area in Feb; Down to 1.6% in the EU
- ECB to launch €750bn bond-buying program – The ECB has also voted to expand the range assets eligible for purchase under the Corporate Sector Purchase Programme (CSPP)
- German producer prices in February 2020: -0.1% on February 2019 – -0.1% on the same month a year earlier
- The ECB will do everything necessary to counter the virus
The Swiss Franc
Swiss Headlines and Economic data
- Swiss National Bank joins coordinated action on dollar liquidity
- Swiss Producer and Import Price Index fell by 0.9% in February 2020
- Swiss National Bank FX interventions at three-year high, data indicates
- The franc stabilizes after early week strength as news of stimulus actions from around the globe (including a potential $1 trillion package from the U.S.) starts to calm traders down from expectations of an economic meltdown.
- Another big risk aversion day in the financial markets, which actually saw a break in the usual risk behavior relationships as even bonds and gold fell. This is likely due to the rising concerns of bank liquidity, an extreme demand for U.S. dollars, and the rising probability of a deep global recession as governments lock down to contain the pandemic.
- Swiss National Bank boosts FX interventions to slow franc rise
- Official Swiss National Bank statement on monetary policy
- In February 2020, the Swiss trade balance came in at a surplus of CHF 2.0B.
- Risk sentiment swings positive on the Thursday trading session, likely a reaction to the continued stream of stimulus actions by global central banks, including a €750bn bond-buying program from the ECB, interest rate cuts and QE from the RBA, and the announcement of a third coronavirus aid package this week from U.S. lawmakers. As expected, the Swiss franc fell against the majors as the environment shifted from an extremely negative vibe.
- Choppy session for franc pairs to end the week, likely moving on counter currency news and coronavirus updates, including actions to limit the accelerating number of cases of coronavirus, and the damage it is doing to financial market liquidity and the economy.
- And in case you missed it, here is a cheat sheet on Who Has Done What for Their Economies Since the Coronavirus Pandemic Hit