The new symmetry in interest rate policy between the SNB and ECB has catalyzed a trend change in EURCHF. The cross has not been particularly responsive to individual data releases, suggesting an orderly move along a fundamentally set trajectory at established technical levels.
Trading Tip – The Franc rallied against the Euro in Q1 as the SNB appeared more hawkish. Now that both banks are firmly on hold, EUR has started to look undervalued and the cross is due for a correction. EURCHF has not been particularly responsive to individual data releases, suggesting an orderly move along a fundamentally set trajectory along established technical levels. That said, the ECB rate decision on deck this Thursday is highly pertinent to the pair’s directional bias. The market widely expects rates to remain unchanged, with traders focusing on the tone in the rhetoric of bank Governor Jean-Claude Trichet. Should his comments sounds substantially more dovish than expected, we may see volatility in EURCHF as current symmetry would be upset by expectations of an ECB rate cut. Conservative traders intent on following a range-bound strategy may opt to remove any unfilled orders or close out any profitable open trades prior to the rate decision on Thursday, 7:45am ET.
Event Risk for Europe and Switzerland
Europe – Germany’s Industrial Production figures printed better than expected today. This diverges with last week’s Euro Zone Retail Sales data that showed a -0.5% contraction, with Germany leading the decline of -3.1%. Wednesday’s current account will shed more light on how Europe’s economic powerhouse is weathering the US-led global slowdown. While Europe’s positive performance at the end of last year will likely show better results in the final GDP reading for the fourth quarter, that data is very much outdated at this point and is unlikely to garner much attention.
Switzerland – Monday saw March Unemployment figures print in line with expectations. There is no further event risk on the Swiss calendar for this week.
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