What recently seemed to be a small market error is beginning to look like a frightening trend. The Swiss franc ignores absolutely any positive news in the world economy and keeps growing against all major currencies.
Who feels bad about it? Bad, above all, for the Swiss economy itself. Exports and production are becoming less competitive and tourists do not want to visit the “expensive country”, which is becoming even more expensive. We passed all this 8 years ago, when the Swiss Central Bank first conducted currency interventions and then set the bar at 1.20 per euro/franc.
USD/CHF chart of the day
If stock markets continue to grow, we will not see any currency interventions in the near future. But what happens when the markets start to fall? For example, from May, which is traditionally bad for the stock market? The flow of money, which is sent to the Swiss franc, may reach the size of a huge avalanche. And it will be too late to do anything on the move.
We are sure that not only the Swiss National Bank, but also large hedge funds around the world are thinking about this problem. In any case, traders should understand that when sentiment changes in the stock market, it is the franc that can grow the most.
After a couple of abrupt moves in early 2020, EUR starts doing what it did for most of the past year. Namely, do nothing at all, but oscillate near the 200-day moving average. So far we do not see the emergence of new trends, which means that speculators working on the strategy of “carry trade” continue to make money without much risk.
A small consolidation, after a strong drop from the highs of the year, only benefited the yellow metal. Investors saw that there were no more people willing to sell the gold and started buying it again hoping for new growth. Against this background, the yellow metal rose in trading on Wednesday to 1555$ per troy ounce. Analysts continue to insist that the growth at the end of the year will be about 10-20%, so the most interesting things are still ahead.
What is waiting for us today?
08.00 Harmonized consumer price index in Germany for December
13.30 Information on the ECB monetary policy meeting
14.30 US retail sales level for December
19.00 Speech by ECB President Lagarde
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