Market news

23 June 2022

EUR/CHF drops to three-month lows amid recession fears

  • Swiss franc among top performers on Thursday.
  • Eurozone and US data add to concerns about the growth outlook.
  • EUR/CHF approaches parity again, bearish pressure intact while under 1.0150.

After moving sideways for four days, EUR/CHF broke to the downside falling to as low as 1.0067, the lowest level since early March. The cross remains under 1.0100, about to post the second-lowest daily close since 2015.

A recovery back above 1.0150 should alleviate the bearish pressure. On the downside, support levels might be seen at 1.0040 followed by the parity zone and then the February low at 0.9970.

Yields down for the wrong reasons

Eurozone June PMIs surprised sharply to the downside across the service and manufacturing indices. For the region, the headline manufacturing came in at 52.0 against a market consensus of 53.8 down from 54.6 while the service dropped from 54.8 to 51.9.

“June PMI data show Europe teetering on the brink of recession. We now expect the euro area to enter into a mild recession in 2022H2”, wrote analysts at TD Securities. They point out that central banks, including the European Central Bank are likely to continue down their plotted paths for now, but they expect them to turn more cautious in their tone into year-end.

Easing tightening expectations from the European Central Bank have eased following the negative economic reports. The German 10-year yield is falling more than 10%, as it stands at 1.42% (on Monday it was at 1.80%). Even Italian yields are lower with the 10-year at 3.48%, the lowest since June 9.

Technical levels

 

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