Why the Swiss Franc Is the Golden Currency
Recently, the safe haven currencies like the Swiss franc and the Japanese yen are the ones that are showing a greater correlation to gold.
Though below the forecasts, the decent PMI numbers in August drove the euro-dollar currency pair to a high of 1.133.
China, the manufacturing hub of the world, has been recording sluggish growth. China’s August PMI numbers were at 47.3, below the crucial level of 50.
The euro drove downward against the US dollar as Mario Draghi, president of the European Central Bank (or ECB), hinted at increasing the stimulus program to spark growth in the European economy.
The less dovish tone of the Riksbank meant the Swedish krona gained for the day, especially against the euro. The euro to krona pair (EUR-SEK) fell more than 1% over the day on September 3.
The euro fought its way to end in positive territory against the US dollar on August 31, 2015, as inflation levels didn’t fall as anticipated in the month of August.
The Swiss franc rose against the US dollar on August 28, 2015. Better-than-expected GDP (gross domestic product) figures lifted the sentiment for the franc.
After making significant moves on the upside, the euro battered down against the US dollar on August 25, 2015. There were sharp gains in the euro-dollar pair.
Countries in the EMEA (Europe, the Middle East, and Africa) region have shown mixed responses to the devaluation of the yuan.
The G10 currencies were impacted positively as the US dollar index dropped in value in the two weeks ending August 21, 2015.
The Chinese yuan devaluation has been the major driver of the massive volatility in the foreign exchange markets over the last two weeks.
The Monetary Policy Committee of the Bank of England should take comfort from rising inflation. It is believed that the members will not be rushed into hiking the rates, as the MPC voted 8–1 in favor of keeping the rates constant.
On August 18, the annualized CPI showed an increase of 0.1% and beat the forecasts. The clothing and footwear sector drove the increase in inflation.
The euro-dollar pair posted a weekly gain of 1.35%, even after a slight fall of 0.35% on Friday, August 14, 2015.
The Greek debt crisis has raised fears of Grexit and is lending to increased volatility in the European (VGK) (FEZ) (HEDJ) as well as global (ACWI) financial markets.
Uncertainty drives investors to safe-haven investments like US blue chip stocks (SPY) and Treasury bonds (TLT). Greece’s default created uncertainty in the market.
Europe (VGK) continues to lure investors as emerging market equities (EEM) face decreasing demand. Currently, developing countries are facing an exodus of funds.
This article discusses three key points to remember when investing in Europe (VGK) (EZU).
European stocks have benefited from the weak euro. Not only do exports look attractive to Americans, large-cap European companies also gain from currency translation.
The Fed is likely to increase rates by September, while other major developed markets are still in the QE phase. The dollar should stay stronger for a while, with higher US interest rates.