Weekly Market Outlook
The FX market has been only slightly affected by the sell-off in equities. Even safe-haven currency were of limited interest to investors. EUR/CHF spent most of the week trading sideways at around 1.1550 before sliding to 1.1447 on Thursday as the equity market sell-off resumed. However, the currency pair went through a choppy session on Monday as the implosion of several complex exchange-traded notes started to spill over into the stock market.
On the economic side, the latest batch of hard data had also little effect on the pair. The unemployment rate held steady at 3.3% in January (versus 3.4% expected), while the seasonally adjusted measure stagnated at 3.0%. January inflation measure are due for release Monday morning at GMT 8:15. The headline measure is expected to come in at 0.8% on a year-over-year basis, while the gauge should have contracted 0.2% compared to December last year. Overall, the inflation will go unnoticed, as the market’s attention will remain on equities and VIX.
Given the recent appreciation of the Swiss franc – the CHF appreciated almost 3% against the single currency from its high from mid-January – it will be interesting to see how the Swiss National Bank reacted to this appreciation. Total sight deposit held at the SNB increased slightly during the first two weeks of January (+3.03 billion) but are still below the all-time high of August 2017.
Since the financial crisis, the publication of Swiss data always had little impact on CHF crosses, especially EUR/CHF. Given the turmoil in financial markets, the release of the data will mostly go unnoticed. Market participants will continue to monitor developments closely in the equity market and more specifically the VIX index. Against such a backdrop, we suspect that the bias is on the downside in EUR/CHF, as a worsening of the risk sentiment remains a live possibility.
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