Daily Economic Commentary: Switzerland

[PipDiddy]

The Swissy was somewhat flat yesterday as it just traded within a 50-pip range against the greenback. Still, it was able to log in some modest gains. The USDCHF fell and closed at 1.0686 from 1.0705.

Yesterday, the Swiss National Bank maintained its benchmark interest rate at 0.25% saying that there is no risk of inflation as of the moment. The country’s CPI softened at an annualized 0.9% in February which is well within the central bank’s inflation target band. Still, the bank stated that they will not keep their accommodative stance as the economy shows some signs of improvements.

The CHF lost some support following the report but it was able to gain it losses back during the latter part of the US session.

The Swissy could once again trade in a range-bound fashion given the lack of economic flows from Switzerland. The release of the US’s retail sales and UoM consumer confidence index, however, could cause some volatility to the USDCHF pair. Upbeat results could benefit the non-dollar currencies like the Swissy.

[PipDiddy]

Thanks to a surge in risk appetite, the Swissy found itself on the long end of the stick last Friday. The USDCHF closed out that day at 1.0583, almost 150 pips lower from its week open price.

Today, at 8:15 GMT, await the release of Switzerland's producer price index (PPI). The PPI, which is mainly used as a leading indicator of inflation, measures the average percentage increase (or decrease) in the selling price of various consumer goods by producers. The expectation is a rise of 0.1% in February, slightly lower than the 0.3% increase seen the month before.

Looking ahead the week, Switzerland's economic cupboard lacks any hard-hitting data but this doesn't mean we won't be seeing any other economic reports! I'll be detailing these reports throughout the week so stay tuned!

[PipDiddy]

The USDCHF rose yesterday, as the dollar ruled yesterday's forex fights. The pair closed slightly higher at 1.0619, marking a gain of 45 pips.

The Swiss producer price index released yesterday showed a surprising result, as it indicated that consumer prices fell by 0.3% last month. It was expected that prices would rise by 0.1%.

Still, much like other Swiss data as of late, currency traders weren't quite interested in this data. The Swissy is more likely to be affected by overall sentiment, especially towards that of the euro, which is it highly correlated to.

One thing to note however is that the EURCHF is now trading at a one year low at around 1.4520. Take note that in the past, the Swiss National Bank has intervened whenever the price fell below 1.4600. Some however, believe that with recent data showing improvements in the global economies, that the chances that currency intervention will take place are lower. In any case, I'll keep you posted on any developments from the SNB.

Today at 6:45 pm GMT, the SECO economic forecasts reports will be released. The quarterly report tries to forecast the outlook of major GDP components like consumption and investment, as well as trying to predict future employment and inflation. If the report shows that the Swiss economy's outlook is looking much better, who knows – traders may look at the CHF as an alternative to euro.

[PipDiddy]

The Swiss franc seemed to be on a sugar high yesterday as it bolted faster than the greenback, pushing the USDCHF to a low of 1.0539 during the US session. Too much Swiss chocolate, perhaps?

The Swiss government gave a more upbeat outlook for their economy as they raised their 2010 GDP growth forecast to 1.4%. Furthermore, they expect GDP to climb by 2% in 2011. Although the government warned that the economic expansion could slow once the stimulus measures are removed, they confirmed that recovery was underway. They also noted that they are already seeing improvements in the country's labor market. Hooray for Switzerland!

Aside from that, yesterday's FOMC statement resulted to greenback selling when the Fed announced that they would still be keeping rates low for an extended period of time. This allowed the franc to push for more gains.

Switzerland won't be releasing any economic reports today so keep an eye out for US data that could cause a shift in risk sentiment. PPI and core PPI are on the US docket today.

[PipDiddy]

The Swissy was able to edge the greenback and the euro once again in yesterday’s currency showdown. The USDCHF fell to as low as 1.0507 before closing at 1.0541 from 1.0547. The EURCHF, on the other hand, hit a new 16-month low when it fell to 1.4475 from 1.4522. Will the Swiss National Bank intervene soon to halt the CHF’s ascent?

No economic reports were released in Switzerland yesterday. Though, it looks like the issue between Germany and Greece is still very much fresh in the minds of investors yesterday. The other day, German President Angela Merkel said that the German government should think carefully first before aiding the debt-stricken Greece. This caused a weakness in the EUR, leading investors back to the safety of the CHF.

Today, several mid tier reports will be coming out of Switzerland. First is the country’s February trade balance report which is expected to have narrowed slightly to CHF2.37 billion from CHF2.42 billion. The account will be out at 7:15 am GMT. Switzerland’s 4Q industrial production, which will be released an hour later, is seen to have gained again by 5.1% on top of its 3.4% expansion during the previous period.

At 10:00 am GMT, the country’s Zew economic expectations index for the month of March will be due. The index printed a score of 52.5 in February. The optimism in Swizerland’s economy could be highlighted more due to the surrounding issues in the euro zone. Hence, we could probably see the index print a higher score for March. Such could give the Swissy some additional support.

But like I mentioned earlier, the SNB could be just around the corner to intervene in the market and weaken the CHF especially now that the currency is already approaching historical highs versus the euro. The SNB favors a weak CHF because a strong one would cause inflation and undermine their exports.

[PipDiddy]

The Swissy found itself dazed and confused in yesterday's trading session. The currency was able to edge up against the euro, but failed to rally strongly versus the dollar. The EURCHF is currently trading below the 1.4400 handle, very near to its all-time low of 1.4300. Will the SNB intervene soon?

No data coming out today but keep an eye, an ear, and possibly even your nose open for any sign of currency intervention from the SNB. Recall that in its last statement the bank renewed its commitment to “act decisively to prevent an excessive appreciation of the Swiss franc against the euro.”

I think now would be a good time to read up on Forex Gump's blog. In his blog he discusses the possible market intervention of the Swiss National Bank as well as some important technical levels.

[PipDiddy]

The Swissy got taken to school on Friday, as the dollar bus sped away! The USDCHF closed the day at 1.0614, up 30 pips from its opening price.

No hard data coming out from Switzerland this week, but look out for the SNB quarterly bulletin due today as well as SNB Chairman Philip Hildebrand's speech tomorrow at 7:30 am GMT. He may talk about the strong appreciation of the CHF. If you take a look at the EURCHF, the pair is at an ALL TIME LOW. Could we see some currency intervention take place soon? Maybe, just maybe!

[PipDiddy]

Even though it was off to a slow start, the Swissy was able to rally and end higher against the greenback yesterday. The USDCHF fell from a high of 1.0662 to a low of 1.0562 - that's a hundred pips! - during the US session.

In its quarterly bulletin released yesterday, the SNB revealed that it will take necessary steps to prevent an excessive appreciation of the Swissy against the euro. According to them, their current monetary policy cannot be maintained without compromising long-term price stability. Although they pointed out that short-term price stability isn't in jeopardy, the danger of deflation is still present.

Despite these cautious comments, the Swiss franc was able to take advantage of greenback weakness, which was most likely a result of the newly-approved US health care bill. This legislation gave rise to doubts as to how the US government would fund the additional expenditures, causing many to think that higher taxes could be levied.

Moving along, SNB Governing Board Chairman Philipp Hildebrand is due to testify on the central bank's monetary policy during the financial crisis. Watch out for hints on their future monetary policy during his speech at 7:30 am GMT today.

[PipDiddy]

The Swissy closed mixed against the greenback yesterday but it was able to deliver the euro another beating. The EURCHF is now trading around 1.4240 which is its new 15-year low! Will the Swiss National Bank intervene soon?

In his speech yesterday, SNB Governing Board Chairman Philipp Hildebrand said that the SNB will indeed step in the forex market to prevent the rapid rise of the Swissy against the euro to prevent a possible deflation in Switzerland. The Swissy has been appreciating against the euro since Switzerland has a relatively more stable economy compared to the euro zone, which has been plagued by debt issues. Given his statement, look out for a possible spike in the price of the EURCHF in the next couple of weeks.

No major economic reports will be issued today in Switzerland. The euro zone, France, and Germany, however, will release their flash PMI figures. Weak numbers in these accounts could lead to a rise in the Swissy once again.

[PipDiddy]

Just like the euro, the Swissy found itself getting sold off on the news that Portugal's credit rating was downgraded by Fitch. The USDCHF ended the US trading session at 1.0727, almost 150 pips higher from its Asian session opening price.

No economic data was released yesterday and none will be coming out today either so expect the Swissy to be driven primarily by news coming out of other major economies, particularly the US and the euro zone.