Trans-Atlantic Exchange Rate Report for January 26th – 30th

Trans-Atlantic Currencies Index

Source: Eurostat and own calculations. Exchange rates are inverted to be USD per local currency (i.e., an increase indicates a stronger domestic currency) and then indexed to be 100 at the start of the period.

From January 26^th-30^th, the Trans-Atlantic currencies displayed a common theme across their respective journeys. The Canadian dollar (red) experienced a consistent loss through the beginning and midweek, before a significant decrease to close the week at a sharp loss of -1.73%. The Swiss franc (maroon) displayed the most hardship of the currencies throughout its journey as the consistent depreciation led to a closing loss of -2.76%, a significant difference compared to the others. The euro (blue) showed a sharp loss through the midweek, before managing to mitigate further loss with a subtle increase to close the week -1.49%. The British pound (green) shared a similar journey as the closing day was a minimal improvement as the currency closed at a loss of -1.7%.

Trans-Atlantic Historical Trends

Source: Eurostat and own calculations. Exchange rates are inverted to be USD per local currency (i.e., an increase indicates a stronger domestic currency. The center line is a rolling three-month average. The upper and lower boundaries are the average plus and average minus one standard deviation, respectively, for the same three-month period.

From January 26^th - 30^th, the Trans-Atlantic currencies shared a common theme of reaching new three-month peaks. The Canadian dollar (CAD) ended last week hovering around its upper bound of roughly 0.73, however after a significant increase, the Canadian dollar now resting at approximately 0.74. The Swiss franc (CHF) displayed a very sharp increase that shifted each benchmark up, comfortably surpassing the upper bound, finally ending its journey with a very subtle decrease. The euro (EUR) appreciated far above its upper bound, before experiencing a loss to close the week. The British pound (GBP) shared a similar journey as the currency far surpassed the upper bound, before depreciating to finish off the week.

Additional Reading

The ‘strongest currency on earth’ just hit an 11-year high — and it’s stirring up trouble in Switzerland

The Swiss franc is often perceived to be a consistent and stable currency from historical trends of increasing despite macroeconomic uncertainty. With the 3.5% gain on the US dollar so far this year, monetary policy for the Swiss National Bank has becoming increasingly complicated. A large aspect of this has to do with additional factors, specifically sitting on the edge of disinflation and negative interest rates, thus constricting the bank’s decision-making.