The euro was a big loser on the week as expectations of further lockdowns grew, sparked by news accelerating case counts across Europe, as well as signs that the coronavirus has mutated. This was likely a drag on the Swiss franc as well as there were no apparent catalysts from Switzerland or global risk catalysts.
The Euro
European Headlines and Economic data
Monday:
Euro zone investor morale rises on vaccine euphoria – Sentix – “Sentix’s index for the euro zone climbed into positive territory for the first time in almost a year, reaching 1.3 from -2.7 in December. A Reuters poll had pointed to a reading of 0.7.”
Tuesday:
Germany tightens travel rules in response to new virus strain –
“The proposal will require people arriving from countries with high case loads or where a new, more virulent strain of the virus is circulating to take a test for the disease.”
“Merkel said the coming eight to ten weeks would be very hard if the British variant spreads to Germany,” one of the people said, adding the chancellor had referred to a tenfold surge in infection numbers in Ireland due to the new variant.”
Wednesday:
German Wholesale prices in 2020: -2.0% on 2019
ECB’s Lagarde pushes back on gloomy forecasts, sticks to recovery outlook – “Even with much of the 19-member euro area in lockdown, Lagarde continued to forecast a recovery, provided that economic restrictions can be lifted from the second quarter and the bloc can overcome a “laborious” start to vaccinations.”
“Among Member States, for which data are available, the highest increases were registered in Ireland (+52.8%), Greece (+6.3%) and Denmark (+5.3%). The largest decreases were observed in Portugal (-5.1%), Belgium (-3.5%) and Croatia (-2.6%).”
In November 2020 the seasonally adjusted industrial production index decreased by 1.4% m/m.
Thursday:
Italy plunges into political crisis when Matteo Renzi, another former prime minister, decided to pull his support for the current coalition government on Wednesday.
Germany targets pandemic recovery without massive stimulus push
ECB minutes raise concerns over euro – “The December minutes show that the ECB is concerned about low inflation and the rising euro, and that the issues are closely related. Despite these concerns, it is unlikely that the ECB will make any major moves at the upcoming meeting. “
Friday:
French consumer prices slowed down on average from 2019 to 2020 – “On average over the year, consumer prices slowed down in 2020 for the second consecutive year. The inflation was up by 0.5% after +1.1% in 2019 and +1.8% in 2018.”
Euro area international trade in goods surplus €25.8 bn; €25.3 bn surplus for EU
The Swiss Franc
Swiss Headlines and Economic data
There were no catalysts from Switzerland this week, as well as any major global risk sentiment moves, so it’s likely the net underperformance in the Swiss franc was mainly influenced by euro weakness. As mentioned above, this was mainly driven by expectations of further lockdowns, sparked by news accelerating case counts across Europe, as well as signs that the coronavirus has mutated).
