EUR/CHF: the rapid fall of the euro

 
 
 
 
 
 
 

The dollar continues to dominate the market. Risks avoid and the Fed's monetary policy, which remains by far the tightest among the policies of the world's major central banks, are the main drivers of the dollar's growth.

Yesterday, the DXY dollar index rose by 1.34%, adding 141 points, and confidently fixed in the zone above 106.00 mark. At the time of publication of this article, DXY futures are traded near the 106.55 mark, near the high of yesterday's trading day, and very little is left before the next "round" mark of 107.00.

DXY Chart

At the beginning of this week, the euro probably suffered the most tangible losses against it. On Tuesday, EUR/USD lost over 150 pips to 1.0265, the lowest level since January 2003. The month has just begun, and EUR/USD has already lost 2.5%.

But the euro continues to decline not only against the dollar, but also in major cross-pairs. For example, the EUR/CHF pair fell sharply last month after the decision of the Swiss National Bank to raise the discount rate by 50 basis points, and today it continues to decline, remaining under pressure from both strong demand for the protective franc and against the backdrop of a rapidly weakening euro.

Inflation in the Eurozone is growing, and investor sentiment is deteriorating. Thus, the Sentix investor confidence index, published on Monday, fell to -26.4 in July against the forecast of -19.9 and against the value of -15.8 in May.

Of the other economic data released on Tuesday, the PMIs (from S&P Global Services) for June in Spain, Italy, France and Germany. Most indicators fell short of expectations and point to an accelerating slowdown in the economy. The Eurozone S&P Manufacturing Composite PMI stood at 52 in June, while the similar PMI for the services sector stood at 53 in June. The euro did not react to these weakly positive data in any way, and the data published this morning indicated a weak, much weaker than forecast, growth in retail sales in the Eurozone (they increased by +0.2% in May against the forecast of growth of +0.4% and -1.4% in April. On an annualized basis, retail sales grew only by +0.2% in May against +4.0% in April and the forecast of +5.4%).

EURCHF Chart

Today, the volatility in the quotes of the euro and the EUR/CHF pair will increase at 14:00 with the publication of the PMI index of business activity (by ISM) in the US services sector and at 18:00 (GMT), when the protocols from the June meeting of the Fed will be published.

As we noted in our review for 06/30/2022, “the bearish momentum prevails in the EUR/CHF dynamics, pushing it towards new multi-year lows. The decline in EUR/CHF may continue until the price “gropes” for new support levels: there are none yet.”