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Leonel Mattos
- Currencies
Swiss Franc and Sterling Gain as Euro Bears the Weight of Bond Stress
By: Fiona Cincotta, Senior Market Analyst
The euro has fallen to a 17-month low against the U.S. dollar and lost ground to both the Swiss franc and sterling as European bond yields climb. The euro versus Swiss franc move reflects bond market nervousness, with the French-German spread around a 15-year high on concerns over French debt levels and political gridlock. Spanish bond yields have edged higher as well, adding a second source of pressure on the single currency. European stock indices, by contrast, are holding up better than the euro.
Fiona Cincotta, StoneX Senior Market Analyst, has more than 15 years of experience trading and analyzing U.K., European, and U.S. markets. Based in London, she covers forex, equities, commodities, and crypto assets, with a particular focus on U.K. and European market themes.
Key Themes
- The euro loses ground against the Swiss franc and sterling as European bond yields climb.
- The French-German spread sits around a 15-year high, raising concerns of contagion.
- European stock indices hold up better than the euro, with the FTSE 100 and DAX moving higher.
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Euro Weakness Against the Swiss Franc Reflects European Bond Stress
The euro's weakness against the Swiss franc and sterling shows where European bond market stress is landing, as rising yields in France and Spain push money toward safety. German Bunds are outperforming, and the euro is under pressure against both sterling and the Swiss franc. "We're seeing this increase in bond yields and nervousness play out much more in the forex market than we are in the equities market", Cincotta says. Spain adds a second layer of strain, with Spanish bond yields edging higher after Prime Minister Pedro Sánchez called a snap election, "raising concerns over the fiscal position as well as political position in the country". For euro traders, the currency is carrying much of the pressure that equity markets have so far avoided.
EUR/USD Hits a 17-Month Low as European Stocks Hold Firmer
The euro's drop to a 17-month low against the U.S. dollar reflects both euro-area bond concerns and some U.S. dollar strength, and EUR/USD has since recovered slightly. European stock indices have not followed the euro lower, with the FTSE 100 up around 0.6% after a decline of about 2% and the German DAX also moving higher. The DAX found support at its 200 EMA, though it still trades inside a descending channel with RSI momentum below 50. That divergence makes the euro, rather than equities, the clearest gauge of European bond market nervousness. According to Cincotta, "European indices are actually holding up a little bit better".
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Fiona Cincotta, StoneX Senior Market Analyst
- Currencies
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