The risk off trade is in full swing this week. If institutional investors are feeling the effects of uncertainty in the markets, they will leave emerging market bonds, for example, but above all the equity markets. Then you quickly buy the supposedly “safe havens”, such as the Swiss franc and gold. Important: Please also read our latest supplementary comment at the end of this article about what happened a few moments before this article was completed!
Above all, the current “flight” into security was fuelled by Donald Trump’s statement yesterday that it might be a good idea to postpone the trade deal with China until after the US elections in November 2020. Ruummmmmmms. What a shock for the stock markets! For example, the Dow 30 has fallen 700 points since the end of last week. The S&P 500 has fallen by 56 points, which at 3,088 points is already running in the direction of a 2% loss. The Swiss franc was able to profit well from this. The most important Swiss franc currency pair, the euro vs. the Swiss franc, has fallen well since the crash on the stock market at the beginning of the week – so the franc has appreciated. The following chart shows euro vs. franc since 21 November. EURCHF has fallen 95 pips to 1.0925 since Friday evening – a significant appreciation of the franc!
Looking at the larger picture, the Swiss franc tends to return to its September lows of just over 1.08. The Swiss franc is expected to strengthen in the second half of the year. There is still a little to be done. But if the equity markets weaken further, and Donald Trump sends another strongly negative signal like yesterday, EURCHF could fall further. But you know… Donald Trump is very important to the US equity market. He sells the rise of recent years as “his” rise, so optimistic statements from him could follow, so that the stock markets can calm down again?
In addition to the Swiss franc, the “safe haven number 1”, namely gold, has benefited from falling stock markets and negative trump statements since the beginning of the week. Since Friday evening, the price of gold has risen by 20 dollars to 1,483 dollars. The following chart shows the price trend since the beginning of November. With this week’s rise, gold can break out of its range – for now. From the bulls’ point of view, further negative news on the trade war is needed.
Currently: See there, suddenly there are reports again that an agreement in the trade war between China and the USA could be possible relatively quickly. And zack, stock indices are rising and gold (-7 dollars) and the Swiss franc are falling.