Both the euro and Swiss franc were net gainers as traders mainly focused on the rising negative global risk sentiment, and possibly on the themes from Europe of central bank stimulus and an economic re-opening very soon.
Global risk sentiment drivers for both currencies are covered in the Swiss franc recap below.
European Headlines and Economic data
The Swiss Franc
Swiss Headlines and Economic data
There were no major news headlines or data from Switzerland, making it highly likely that the franc’s outperformance this week was mainly due to global risk sentiment and counter currency weakness.
The franc fell only to the Japanese yen, a behavioral pattern that often occurs during a risk-off environment.
We saw franc strength in the early London session, possibly off of weaker-than-expected European trade data (e.g., German Exports in April 2020: -31.1% on April 2019) or geopolitical tensions (North Korea cuts communications with South Korea, Pompeo demands Iran release US detainees, urges Libya ceasefire)? But during the U.S. session, the franc turned lower against the high-yielders, possibly on rising risk-on sentiment after the WHO’s makes a U-turn on asymptomatic transmission.
Swiss franc strength continued into the Thursday session off of the FOMC event. Negative global risk sentiment accelerated during the US session, likely on fears of a second wave (Florida Reports Highest Daily Increase in Coronavirus Cases Since Outbreak Began) are added on top of the Fed’s dismal outlook to worry about. The franc rallied further against the higher-yielding currencies while taking a step back against the Dollar and the yen.
Positive global risk sentiment recovers during the Asia and London trading sessions (possibly profit-taking?) to send the franc lower against the risk currencies and a bit higher against the Japanese yen.
But sentiment swung back to negative later prompting a reversal of the session’s mixed performance earlier.
The risk reversal was likely on fears of a second wave and a re-implementation of lockdown protocols (CDC warns U.S. may reimplement strict coronavirus measures if cases go up ‘dramatically’).