eur fundamentals

Euro Loses Ground Despite Hawkish Comments, Swiss Franc Struggles To Recover

Thursday, 09 October 2008 22:24:50 GMT  |  Terri Belkas, Currency Strategist

The euro held up throughout the European trading session amidst hawkish commentary by European Central Bank Governing Council member Ewald Nowotny. Mr. Nowotny said that Wednesday’s rate cut to 3.75 percent will “ensure that inflation expectations remain anchored” and that it should “not be seen as a first step in a possible series.”

This rhetoric helped to curb speculation that the ECB would be inclined to cut rates yet again at their next meeting, and as we mentioned yesterday, the ECB remains one of the most stubborn central banks when it comes to maintaining their focus on price stability. Nevertheless, the euro fell during the course of the New York trading session as the greenback recovered against most of the majors. The Swiss franc, on the other hand, remained fairly strong against the US dollar as the currency remains a “safe haven” during times of volatility, similar to the Japanese yen. Looking ahead to Friday, the euro faces limited event risk while the Swiss franc will see the release of labor market data. The Swiss unemployment rate is anticipated to hold steady at 2.4 percent for the month of September, suggesting that domestic demand will continue to hold up. However, there is potential for the unemployment rate to rise, as companies may not feel as inclined to hire workers as the global economic slowdown threatens to weigh on Swiss export growth. Nevertheless, Swiss fundamentals don’t tend to have a huge impact on the Swiss franc, leaving technical levels all the more important for trading pairs like USD/CHF. 

Check out Daily Fundamentals in its entirety for analysis and outlooks on the US dollar, euro, British pound, Japanese yen, and the commodity dollars.

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