Morning Commentary: “Is it Safe?”

A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.

“Is it Safe?” Share this story: Alan Rose Foreign Exchange Senior Trader

We have been writing for a number of months about the extraordinary low volatility and lack of directional movement in the U.S. dollar (DXY index). While there have been short lived bullish and bearish trends over the past six months, the DXY index is almost exactly where it was in back in November 2018.   But within that story, there have been individual currencies that have been trending. One of the key currencies that has been in a steady decline since January 10th is the Swiss franc (CHF). Since the start of the year, the CHF has declined by nearly 4.0%. This would seem highly unusual as this currency, along with the Japanese yen, is a traditional safe haven currency.  With uncertainty surrounding Brexit, the Fed's dovish pivot, global uncertainty, Washingtonian politics etc., there does not seem to be a catalyst for the "all-clear" signal just yet.   Yet both the CHF and the Japanese yen have been weakening steadily since the beginning of the year with the CHF falling almost twice as fast as the Japanese yen. When fundamentals become muddled and subjective, price action becomes paramount. Today’s move by the CHF brings the CHF to its weakest point since January 2017. Investors and traders seem to be saying that the CHF is no longer needed as a safe haven currency and combined with other weak points in Europe, almost all European currencies continue to be beaten down. HERE ARE THE KEY NEWS STORIES FROM OVERNIGHT: Oil prices continue to march higher again today (yesterday's lead story) and have been trending higher all year long.  While it helped petro currencies (Norway and Canada) yesterday, the U.S. dollar's overall strength against major and emerging market currencies is trumping the higher oil prices with almost all major currencies weaker today.

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