Monday risk-on vibes sent the euro and Swiss franc lower early in the week, but a highly anticipated EU Recovery Fund deal and shift in global risk sentiment pushed both currencies to the top spots among the major currencies.
European Headlines and Economic data
EU Clinches Massive Stimulus Deal to Bind Continent Together – Stimulus package worth 750 billion euros ($860 billion). The emergency fund will give out 390 billion euros of grants and 360 billion euros of low-interest loans.
The euro fell after the event, likely a “sell-the-news” reaction as deal was highly anticipated, but we did see euro strength during the U.S. session without an apparent direct catalyst. It’s likely U.S. dollar weakness (possibly on news of a delay in the U.S. stimulus bill) was the driver for the euro’s turn higher.
EU parliament to push for tweaks in recovery plan, long-term budget – many parliamentary members were unhappy with the details of the deal, so it’s likely we’ll see a long battle of where the support we’ll go before we’ll see the deal come to life.
The Swiss Franc
Swiss Headlines and Economic data
CHF weakness accelerates on the session, likely on global risk-on vibesthis time after the EU finally gets a deal done on the recovery fund, positive expectations of another round of U.S. stimulus soon. The franc did stabilize and reverse sentiment during the U.S. session, possibly on U.S. dollar weakness (possibly sparked by news of a delay in the U.S. stimulus bill).
The slight dip in CHF during the London session may be a reaction to UBS’ warning that the U.S. could label Switzerland a currency manipulator. Whatever it was, it was a short-lived reaction as the franc continued its climb higher, likely with the help of rising risk aversion vibes sparked by geopolitical tensions (U.S. charges two Chinese nationals in coronavirus vaccine hacking scheme, U.S. gives China 72 hours to shut Houston consulate)
Risk aversion behavior ramped up during the Thursday session, this time on signs of a weakening rebound of the U.S. jobs sector. U.S.-China tensions seemed to have been on the rise during the session, along with rising COVID-19 worries and U.S. big tech sector weakness to help the franc move higher.
The franc’s rally continued on Friday, and no main catalysts from Switzerland, it’s likely the strength was a continuation of Thursday’s price action and broad risk aversion sentiment. U.S.-China tensions were once again a focus, this time after China ordered the closure of a U.S. consulate in Chengdu and US Secretary of State Mike Pompeo urged China’s citizens to help ‘change the behaviour’ of their government.