EUR/CHF struggles to defend parity around seven-year low, Eurozone GDP, Ukraine eyed
- EUR/CHF treads waters after bouncing off the lowest levels since 2015.
- Fears of stagflation in the bloc join deadlock in Russia-Ukraine talks to favor bears.
- Revised readings of Eurozone Q4 GDP are widely anticipated to confirm initial forecasts.
- Risk catalysts gain more weight while seeking directions.
EUR/CHF fades bounce off multi-year low as sellers attack intraday bottom surrounding 1.0055 heading into Tuesday’s European session. That said, the pair slumped to the lowest since January 2015 before bouncing off 0.9972.
Fears of stagflation for the Eurozone, mainly due to the Ukraine-Russie crisis, weigh on the EUR/CHF prices.
While justifying the same, the Financial Times (FT) said, “The outbreak of war has sent shockwaves through equity markets across Europe, with the continent’s Stoxx 600 index sliding by 8 percent since the crisis began. Investors, who worry that the resulting jump in oil prices will hammer consumers in a region heavily dependent on energy imports that were already grappling with the highest inflation in decades, last week pulled a record $6.7bn from European stock funds.”
On the same line, Reuters portray the deadlock over a ceasefire and human corridor talks between Ukraine and Russia. “Ukrainian officials said a Russian airstrike hit a bread factory in northern Ukraine on Monday, killing at least 13 civilians, while talks between Kyiv and Moscow made little progress towards easing the conflict,” per the news.
It should be noted that a lack of major updates on the Kyiv-Moscow tussles and headlines from Russia suggesting the nation’s readiness to offer a safe passage to Ukraine’s civilians in some cities seemed to have paused the previous day’s heavy risk-aversion. Additionally, defending the optimists are the headlines suggesting the European Union (EU) and the UK’s rejection of the US plan to ban Russian oil imports in totality.
Even so, S&P 500 and the Euro Stoxx 50 Futures drop around half a percent while the US 10-year Treasury yields extend the previous day’s rebound from two-month to 1.8%, up five basis points at the latest.
Looking forward, final readings of Q4 Eurozone GDP are expected to confirm 0.3% QoQ and 4.6% YoY growth on the non-seasonally adjusted basis, which in turn can help the EUR/CHF to battle the bears.
However, challenges to market sentiment, mainly emanating from Ukraine and Russia, keep the driver’s seat.
Technical analysis
Unless rising past April 2015 bottom surrounding 1.0240, EUR/CHF prices are likely directed towards the year 2015 low of 0.9725.