Britain and Switzerland continue to post negative data suggesting that the two European nations are headed for recession. Britain’s NIESR July GDP estimate came in just shy of signaling an outright halt in economic growth, coming in at 0.1% from 0.2% the month prior. Swiss Retail Sales disappointed analyst forecasts of a 3.3% increase, coming in at a mere 0.7% in June. May’s strong showing in the metric was skewed in that a large portion of the reading was due to Switzerland’s hosting of the UEFA Euro 2008. With both economies on a downward path with interest rate cuts priced in for the next 12 months, a lack of a substantive strength imbalance is likely to keep GBPCHF range bound in the medium term.
Trading Tip – Minutes from the Bank of England’s recent meeting along with Britain’s GDP figures will be released this week. Traders may see additional volatility around these releases as the market tries to divine the timing for a BOE rate cut. Conservative traders may want to wait for these releases to pass, then reassess the trade prior to setting entry orders. In addition to a stop loss, we will look to control risk further by removing any unfilled orders by the end of the week or should spot close above 2.0734 prior to our order being filled.
Event Risk for the UK and Switzerland
UK – Minutes from the Bank of England’s August 6 & 7 meeting will be one of the two highlights of the week. The document will likely add little news to the market as expectations of any upward rate moves have been effectively abandoned. That said, traders will look to the release for clues on the timing of the first rate cut. Thursday also sees the release of the Retail Sales figure. Analysts predict a decline of -0.2 percent for the month of July. The market will pay particular attention to the release of Britain’s second-quarter GDP, with expectations calling for the growth to register at a meager 0.1%.
Switzerland – Thursday is expected to see the Trade Balance come in at 2.00 billion Francs from 2.41 billion the month prior. Exports may suffer along with deteriorating conditions across Europe: the EU absorbs 60% Switzerland’s outbound trading volume. The ZEW, survey of analyst sentiment is also due on Thursday, with further deterioration likely following July’s dismal reading at -76.9.
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GBPCHF Range to Hold on Slowdown Across Europe
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