In January 2015, the Swiss National Bank, in a move that took everyone by surprise, decided to remove the then floor of 1.20 in the euro/Swiss franc currency pair exchange rate, despite repeatedly promising to defend that level at all costs and for as long as necessary. Rates literally tanked more than 2,000 pips in a matter of minutes as the franc skyrocketed. Fast forward just a little more than three years...
Today’s economic calendar signals that the recent move in the Euro has stretched its limits; Business Confidence data from all regions and most importantly the German Ifo read missed while Case Shiller Housing, Consumer Confidence and New Home Sales all beat expectations in the United States.
Just a couple of weeks ago, the dollar was languishing in the doldrums. This was in part due to that disappointing US jobs report which helped to lower expectations for aggressive rate hikes from the Fed and partly because of trade war concerns. Well, since then, the markets’ expectations over short-term rate rises have been on the rise again as geopolitical tensions abated and incoming data has been mostly positive.
This week was all about the pound; next week could be all about the euro. The pound’s rally came to an abrupt halt as economic data from the UK disappointed expectations and after the Bank of England Governor Mark Carney warned that a rate rise in May was not a forgone conclusion. The resulting rally in the euro/British pound (EUR/GBP) currency pair initially kept the EUR/USD supported.
Boosted by the oil price rally, the Canadian dollar remains fairly supported despite the Bank of Canada this week reiterating that it will be cautious with respect to future hikes amid concerns over trade issues. Still, the central bank tried to sound optimistic about the economic outlook and if today’s inflation and retail sales figures show positive surprises then this could support the CAD further. But if they disappoint badly then we could see a sharp sell-off as investors’ expectations over the next BOC rate hike is pushed further out.
Today was a win for the euro bulls. The currency started the session on its backfoot, topping at the European open before seeing bad Italian CPI and the worst German Sentiment data since 2012 which led to a poor read on Eurozone Sentiment.
The euro opened the week on a strong note, recovering back to last week’s high near the 1.2450 mark. Price action moved sharply higher on the European open at 2:00 am CT and saw further gains as the U.S. dollar weakened on frothy data and a tweet from President Trump.