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Despite big stimulus measures coming from the European Central Bank and the Swiss National Bank, global risk sentiment and counter currency flows were the name of the game for euro and franc traders this week, resulting in a mixed performance for both.
The Euro
European Headlines and Economic data
Monday:
- German recession inevitable but public finances solid: Bundesbank
- ECB Ready to Do More for Coronavirus Emergency if Needed, Visco Tells Paper
- Euro area consumer confidence is down 5.0 to -11.6; down 4.5 points to -11.0 in the EU
Tuesday:
- COVID-19 outbreak leads to largest collapse in European business activity ever recorded
- Record contraction in Germany’s service sector as impact of coronavirus outbreak hits domestic economy
- Coronavirus outbreak drives record contraction in French private sector activity
- ECB Intends to Be Major Buyer in Commercial Player Market, Villeroy Says
- ECB purchases of exchange-traded funds can’t be ruled out: Kazimir
Wednesday:
- Euro zone mulls 2% of GDP credit from bailout fund to fight coronavirus
- German business morale slumps to lowest since 2009: Ifo
Thursday:
- ECB shakes off limits on new €750bn bond buying plan
- French economic activity at 65% of normal levels: INSEE
- Coronavirus darkens outlook for German exporters, Ifo reports
Friday:
- Again, risks sentiment and counter currency flows were the main driver for the euro, which rose against a falling U.S. dollar (massive Fed & U.S. government stimulus end the Greenback rally) and safe havens yen and Swiss franc, as well as the Loonie (due to rate cuts and falling oil prices). The massive stimulus measures from around the globe stemmed the extreme negativity seen over the past couple of weeks, prompting some give back in the weakness in the Aussie, Kiwi, and British pound against the euro.
The Swiss Franc
Swiss Headlines and Economic data
Monday:
- A net positive gain on Monday for the franc, likely due to the continued negative risk sentiment fueled by the ongoing coronavirus pandemic and likely economic damage to the global economy. It’s also likely the the failure of the stimulus bill to pass the U.S. Senate added to market fears.
Tuesday:
- Price action began to diverge among franc pairs as risk sentiment continued to flow positive on more news of massive stimulus measures coming, (e.g., ECB Intends to Be Major Buyer in Commercial Player Market, Canada doubles value of coronavirus stimulus package, New Zealand announces mortgage holiday, business finance support to cushion virus impact, etc.), prompting strength against the yen and U.S. dollar, while falling against AUD, NZD, GBP and the euro.
Wednesday:
-
Swiss National Bank sets up covid-19 refinancing facility
- “The facility will have no upper limits on the amounts available and will be available from March 26”
-
Swiss National Bank Quarterly Bulletin
- Swiss National Bank maintains expansionary monetary
policy, raises negative interest exemption threshold,
and is examining additional steps - In this pandemic environment, the global economic outlook is
extremely uncertain. Pronounced economic declines are to
be expected in the first half of 2020. - Due to the rapid spread of coronavirus, the short-term
outlook has worsened markedly for Switzerland. Swiss GDP growth is likely to be negative for the year as a whole - With the Swiss franc appreciating in nominal terms, its real external value also increased and, in February, reached levels similar to those last seen in August 2019. In a longer-term comparison, the Swiss franc is highly valued.
- Swiss National Bank maintains expansionary monetary
Thursday:
- Global risk sentiment continued to move positive, once again on more news of stimulus measures to support the global economy (e.g., ECB shakes off limits on new €750bn bond buying plan, U.S. Senate passes $2T disaster aid bill, South Korea to relax FX liquidity rules for banks, India cuts rates & unleashes $50B in stimulus, etc.).
Friday:
- Risk sentiment soured a bit on Friday, possibly on traders fearing that the U.S. stimulus bill may hit a snag in the House and on the continued acceleration of cases around the globe. But we saw a flip in sentiment by the U.S. session after the stimulus bill was later passed and signed by President Trump in the afternoon session, which was likely the catalyst for the franc’s big out performance against the Greenback and fall against AUD, NZD, & GBP going into the weekend.