Daily Economic Commentary: Switzerland

[PipDiddy]

The Swissy, for a moment, paid a visit to its yearly high contra the USD. The USDCHF went as low as 1.0035 before closing higher at 1.0100. A break below the yearly low at 1.0034 could mean parity for the two currencies.

Both Switzerland and the US were idle yesterday in terms of economic reports. Trading was flat and tight given the lack of economic flows. Though as mentioned earlier, the Swissy approached for awhile its yearly high against the dollar before pulling back.

Today (10:00 am GMT), Switzerland’s ZEW economic expectations in November will be made public. October’s tally was pegged at 65.0. Given the improvements in Switzerland’s SECO consumer climate and CPI, it is probable to see a gain in this index as well. Such could then be bullish for the CHF at least in the short term.

Later at 5:00 pm GMT, SNB Governing Board Member Thomas Jordan will issue a speech regarding the challenges of SNB’s monetary policies. Since he is going to talk about the bank’s challenges, there’s a chance that he could drop some clues regarding their possible monetary actions in the future. Any suggestions about the bank’s future moves could cause some volatility for the CHF.

[PipDiddy]

The Swissy took a couple of steps back from parity in yesterday’s trading session. It looks like the dollar bulls managed to gather some strength risk aversion crept back into the markets.

The ZEW Economic Expectations wasn’t able to provide support for the Swissy. The survey, which is designedto measure sentiment by using a positive/negative scale, showed that investors became less optimistic this month. It printed a reading of 56.4, lower than October’s 65.0 reading.

On deck today is the country’s Producer Price Index for October. It is expected to show that the overall prices of goods and materials purchased by manufacturers rose by another 0.1%, after increased 0.2% in September.

Take note, however, that the Swissy’s price action would probably be largely dependent on the euro zone’s upcoming GDP report at 7:00 am GMT. If euro zone’s GDP comes out better-than-expected, the Swissy would most likely be bought up as well.

[PipDiddy]

Dollar bears took over yesterday, bringing the USDCHF along with them. The USDCHF gave back much of its gains from Thursday to end the week at 1.0119.

On Friday, the producer price index showed that manufacturers paid 0.4% less in October on goods and materials than they did in September. This didn’t have much effect on the markets, as traders were focusing on reports coming out from the euro zone. I’d be more worried if prices continue to fall down the line – could it spark inflation concerns?

Nothing on deck today, so be on the lookout for high impact data coming out from the US later today. Tomorrow, we could see more movement as the retail sales y/y report comes out at 8:15 am GMT. Sales are expected to show an increase of 1.1%. If this comes in better than expected, could traders try to bring the Swissy nearer to parity?

[PipDiddy]

The Swissy saw a bit of wild action yesterday as the USDCHF spiked up and down after Fed Chairman Ben Bernanke's speech. The pair shot all the way up to 1.0145 as Bernanke ensured a strong USD policy but it snapped back to consolidation mode soon after.

No economic reports are due from Switzerland today, leaving US economic data as the main driver for the USDCHF price action. The US schedule is jampacked today as it releases PPI figures, TIC long-term purchases, and industrial production data starting 1:30 pm GMT. Would we see more spikes on the USDCHF chart today? Better be careful!

[PipDiddy]

The Swissy snapped its two-day winning streak over the greenback as the US Dollar index rallied by as much as 1%. The USDCHF recovered much of its losses this week. The pair, however, hit some considerable resistance at the 1.0200 mark and its long term downtrend line. It could be heading down again.

The annualized retail sales in Switzerland slid again in September after already declining by 1.0% in August. Retail sales fell by 1.6% against the projection of a 1.1% increase. This could have a bad impact on Switzerland’s economy at least in the short term as retail sales are a major part of the country’s consumption which takes up about 57% of the country’s GDP.

The CHF fell following the release.

Meanwhile, several lackluster economic reports came out in the US. US’s core and headline PPI both came in below expectations. The weak PPI results could be an indication of a feeble CPI as well. Also, industrial production eased in October with only a marginal 0.1% increase. Production was initially seen to rise by 0.4% but the expiration of the government’s “Cash for Clunkers” program seemed to have tapered demand.

The equities markets in the US were somewhat mixed. Though, the major indices still managed to settle at new yearly highs. As mentioned, the USD rebounded following the weak economic reports.

No economic reports are due in Switzerland today. The CHF, however, could take cue from the CPI and housing data releases in the US later. Both building permits and housing starts are seen to rise slightly. US’s headline CPI, on the other hand, is estimated to remain at 0.2%. Positive results from these accounts could reflect well on the “anti-dollars” like the CHF.

[PipDiddy]

The Swiss franc remained headstrong yesterday even as other major currencies fell against the dollar. The USD/CHF, from a high of 1.0170 during the Asian trading session, dropped all the way towards the 1.0100 region as the trading day moved forward.

Economic data from Switzerland was non-existent yesterday but expect to see the country’s trade balance today at 7:15 am GMT. The country’s surplus is predicted to have risen to 2.15 billion CHF in October from 1.91 billion CHF in September. The trade balance measures the net difference in value between imported and exported goods. A surplus value indicates that more goods were exported than exported.

[PipDiddy]

The Swissy took some hits in intraday trading yesterday, falling on speculation of tighter banking regulations. The CHF was able to hang on though, as the USDCHF and EURCHF pairs rose to just 1.0135 and 1.5119.

The root of the volatile movement yesterday were comments made by SNB Vice Chairman Philip Hildebrand, who said that the Swiss banks may need more regulation than banks from other countries. In turn, this caused traders to frown upon the franc, which led to some CHF selling yesterday. Take note that Hildebrand takes over as head of the SNB this coming January. In the past, he has pushed for a breaking up for banks that are considered “too big to fail” in order to limit potential risks if such banks do fail. Let’s see if he pushes this idea further one he steps up as the head honcho of the SNB next year.

In other news, a report showed that the Swiss trade surplus grew more than expected in October, rising to 2.46 billion CHF. It was originally estimated to increase to just 2.15 billion CHF.If this keeps up, it may give more incentive for the central bank to keep pushing for a weaker franc...

It looks like traders are gearing up for SNB Chairman’s Jean-Pierre Roth’s speech later today at 9:15 am GMT. EURCHF trading has been tight as of late – are traders waiting for any comments regarding the value of the CHF? Take note that last week, G20 leaders did not talk about the strength of their currencies. In the past however, we’ve seen the SNB intervene in the markets in order to keep the CHF weak. With this in mind, are traders fearful that another intervention is in the making?

[PipDiddy]

The USDCHF zoomed from the 1.0100 area all the way up to a high of 1.0224 last Friday as USD strength dominated in the markets. SNB Chairman Jean-Pierre Roth's bullish outlook for the Swiss economy proved to be no match for last week's USD rally.

During his speech last Friday, SNB Chairman Roth mentioned that the central bank's unconventional policy measures worked in curbing the effects of the economic recession. According to him, those measures have boosted liquidity and prevented an excessive strengthening of the CHF.

This week's economic data from Switzerland is light as usual. Tuesday has the UBS consumption indicator on tap. The reading for September stood at 0.63 and any improvement for October could allow the CHF to regain ground. The third quarter employment level, which is estimated to be 3.96 million, is also due then. Lastly, the KOF economic barometer, which could rise from 1.45 to 1.85, will be released on Friday.

[PipDiddy]

The Swissy snapped its two-day slump as it rallied against the USD in yesterday’s price tug-o-war. The USDCHF pair fell to as low as 1.0072 before closing at 1.0096. 1.0034 appears to be a critical support for the pair. We could probably see parity between the two currencies if the pair breaches the mentioned level.

No economic reports were due in Switzerland yesterday. Higher yielding assets and most of the “anti-dollars” staged a coup when existing home sales in the US in October jumped 10.1% from September to 6.10 million units. Comments from Chicago Fed President Evans and St. Louis Fed President Bullard also placed selling pressure on the USD. Evans said that the present level of low interest rates would likely stay until 2010. Bullard, on the other hand, also said that the Fed would possibly keep its debt-buying program past the 1Q of 2010.

Today, Switzerland’s UBS consumption indicator for the month of October will be released at 7:00 am GMT. The account logged in a score of 0.63 back in September. A gain in the index could benefit the CHF once again.

Switzerland’s employment level for the third quarter will also be published today at 8:15 am GMT. The number of people that were employed during the period is seen to have increased slightly to 3.96 million from 3.95 million. Creation of jobs is vital for any economy since it is one of the major determinants of consumer spending. Hence, a rise in employment could also give the CHF some boost.

The major market moving event for today, however, will be the publication of US’s preliminary GDP for the third quarter. The expansion in the US economy is seen to have slowed to 2.9% from the 3.5% reported earlier due to a widening trade deficit. The report could cause some volatility among the currencies so be on the guard. In any case, a better-than-expected result could spark another buying frenzy among anti-dollars like the CHF.

[PipDiddy]

The Swissy fell early during the Asian session but eventually managed to regain its losses once the day rolled along. From the looks of it, the Swissy was propped up by the optimistic results of German Ifo Business Climate report from euro zone.

Switzerland’s economic calendar will beclear as the bright blue sky today as no data is scheduled for release. The next only data left on the country’s calendar is the KOF economic barometer. It will be released on Friday, 10:30 am GMT.