CHF weakness: A reflection of euro strength? - BBH
|Analysts from Brown Brother Harriman, suspect that the recent weakness that surrounded the Swiss franc is a reflection of euro strength.
Key Quotes:
“The Swiss franc is trading at its lowest level against the euro since the Swiss National Bank surprised the world by lifting the currency cap in early 2015. This week's move has been especially pronounced. The euro has appreciated by a little more than 2% against the franc, barring much of a setback tomorrow, it will be the largest weekly advance in 2 1/2 years.”
“The euro and the Swiss franc are highly correlated. Over the past 60-days, the correlation of percentage change of the two currencies is 0.85. For the past two years, the rolling 60-day correlation has not fallen below 0.75 and rarely moves above 0.90. That makes this week's development all the more eye-catching.”
“The dollar briefly fell through yesterday's lows in Asia and now has rallied above yesterday's high. A close above yesterday's high(almost CHF0.96) would be a bullish technical development.”
“The $2 mln question is if the Swiss franc is a lead indicator of the euro. Over the past year, it appears that, to the contrary, it is the euro that leads the Swiss franc. The euro is not just gaining against the dollar and Swiss franc, but it is also appreciated against the yen and sterling.”
“The easing of the political anxiety, which was a key theme in the 2017 outlook pieces, also has removed a prop for the franc.”
“We do not think the franc's losses against the dollar is a convincing sign that the euro is about to turn lower. We suspect the franc's weakness is a reflection of euro strength that is being seen against several other major currencies.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.