The latest ECB meeting creates a problem for the SNB

Giles Coghlan LLB, Lth, MA Financial Source

At the last ECB (European Central Bank) meeting last week the ECB revised their growth projections higher this week for 2020 to -8.0% and inflation expectations for 2021 were revised upwards to 1.0%. The EUR received a lift. Although going into the last ECB meeting last week ECB’s Lane had expressed concerns about a strong euro President Lagarde also seems relatively unfazed by the recent euro strength. However, a strong euro does hurt the European export market and the ECB will not want to see it strengthen.

The SNB (Swiss National Bank), on the other hand, does want a strong euro. Or at least it is part of their mandate to buy euros to try and alleviate some of the pressure on the Swiss franc (CHF). A strong CHF hurts the Swiss export economy, so they too want (and do intervene) to weaken the CHF. The SNB does this by buying euros. You can see that on their latest sigh deposit report this week where they reached high levels for the year. The total sight deposits were CHF 704.1 billion. Take a look at the chart below to see the sight deposit levels:

So this now creates a tension in the EURCHF currency pair where we could have two central banks actively fighting each other. This can create opportunities for nimble investors if either the SNB or the ECB steps up the battle to protect their currency and their export markets. Here is a look at the EURCHF pair with some of the key levels to watch out for. If the ECB starts to talk down the euro watch out for retaliatory verbal interventions on the EURCHF pair.

Learn more about HYCM

Author

Giles Coghlan LLB, Lth, MA

Financial Source

Giles is the chief market analyst for Financial Source. His goal is to help you find simple, high-conviction fundamental trade opportunities. He has regular media presentations being featured in National and International Press.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.