The euro gets a little bit of love this week after the announcement of a new recovery fund by the European Commission.
The Swiss franc takes a hit for the week, likely on a combination of early positive risk sentiment, weak Swiss economic updates, and commentary from the Swiss National Bank that they are more willing to intervene in the currency markets if necessary.
European Headlines and Economic data
EU unveils plan to borrow 750 billion euros to aid economic recovery (PEPP)- up until this announcement, the euro seemed to have been mostly influenced by the positive risk sentiment environment as it outperformed the “safe havens”, while underperforming against the higher-yielding currencies. This plan was seen as a historic first step since Germany was always against jointly-issued debt, but the process to finalize the plan will likely take some time as there are fiscally conservative countries looking to put stipulations on those loans and grants.
The Swiss Franc
Swiss Headlines and Economic data
Broad positive risk sentiment (continued recovery hopes and vaccine development news) was likely the driver for the Swiss franc on Tuesday as it outperformed the other “safe havens” while underperforming against the higher-yielding currencies.
The broad, sudden move higher against the majors during the U.S. trading session was likely on a shift in risk sentiment towards negative, this time possibly on geopolitical tensions rising (e.g., U.S. weighs sanctions on Chinese officials, firms over Hong Kong, China approves controversial national security bill for Hong Kong).
We see a somewhat broad move higher in the franc against most of the majors, possibly on a bit of safe haven flows as geopolitical tensions rise (Riot police deployed in Hong Kong, China approves controversial national security bill for Hong Kong)?
A strong pop higher in the franc against the majors during the U.S. trading session didn’t seem to have any direct catalysts. It’s likely Swiss franc traders were focusing on geopolitical issues during this move as the main broad market stories of the day were once again focused on U.S.-China issues (Trump orders his administration to begin eliminating Hong Kong privileges, Hong Kong government warns removing U.S. special status is ‘double-edged sword’)