Daily Economic Commentary: Switzerland

[PipDiddy]

After it looked like the Swissy was going to make a comeback, it lost track and ended up once again on the losing side versus the dollar. The USDCHF closed slightly higher at 1.0743.

The franc has been getting caught up in all the hoopla surrounding the euro zone. Remember, the franc and the euro are highly correlated – thus, whenever the euro is plagued by any problems, it also affects franc trading. With the EU summit coming to an end today, will we see the spill over effect continue today?

[PipDiddy]

The Swissy put up a valiant fight last Friday, struggling to put an end to the greenback's raids. The USDCHF was unable to move past the 1.0750 mark and retreated to a low of 1.0636 instead.

Three important economic reports are due from Switzerland this week. On Tuesday, the UBS consumption indicator is set for release at 6:00 am GMT. The consumption indicator climbed from 1.20 to 1.36 in January and could post another uptick for February. On Wednesday, the KOF economic barometer is on deck. This combined reading of Swiss economic indicators is expected to rise from 1.87 to 1.91 in March, reflecting an improvement in Switzerland's economy. Lastly, on Thursday, Switzerland will release its SVME PMI, which could land at 58.9 in March.

Better than expected figures could allow the Swissy to stay resilient against the greenback. Keep an eye out for top-tier US economic reports due this week, namely the core PCE index, ISM manufacturing PMI, and non-farm payrolls!

[PipDiddy]

The Swissy had a bad hair day yesterday as it slumped against both the EUR and the USD. The EURCHF rose to and closed at 1.4321 from 1.4279. Similarly, the USDCHF also reached 1.0624 from 1.0592.

Switzerland did not release any economic reports yesterday. Last Friday, a bailout plan, which included an IMF aid and other bilateral loans, for the debt-stricken Greece was finally agreed upon. Confidence in the euro resurfaced following the news and even throughout Monday.

Today (7:00 am GMT), Switzerland’s UBS consumption indicator will be published. The index logged in a score of 1.36 in January. Given Switzerland’s improving economic condition, the index could register a higher score again for the month of February. An uptick in this account could give the Swissy some support.

[PipDiddy]

The Swissy, much like the euro, failed to hold its ground against the greenback in yesterday's trading session. The USDCHF, which started the Asian trading session at 1.0624, closed the day higher at 1.0668.

The UBS consumption indicator released yesterday printed a reading of 1.20 for March, lower than February's revised down 1.32 reading. This indicates that consumers grew less pessimistic about their financial standing and outlook towards the Swiss economy.

On the docket today is the KOF economic barometer is due for release today. It is expected to print a reading of 1.91 for March, higher than the previous month's 1.87. The KOF economic barometer predicts the direction of Switzerland's economy for the next six months through the use of 12 economic indicators. If the actual figure comes in higher, we could see some buying support for the Swissy.

[PipDiddy]

The Swissy bulls took advantage of the dollar's weakness in yesterdays trading rounds, bring down the USDCHF pair to monthly lows. My question is, will the 1.0500 handle hold?

Yesterday, the KOF economic barometer was released, printing a slightly better than expected reading. The index posted a score of 1.93, while consensus was for a score of 1.91. This indicates that economy is expected to pick up in the next 6 months. It will be interesting to see how traders trade the franc in coming months, given the recent developments in the euro zone.

Remember, one reason why the franc has appreciated as of late is because of euro weakness. As investors became scared to invest in euro zone assets, they decided to move their funds into Swiss financial assets. If more debt concerns prop up in the euro zone, this could benefit the franc down the line.

Later today, the SVME purchasing managers index is due at 7:30 am GMT. The index measures business sentiment amongst Swissy businessmen. Scores above 50.0 indicate expansion while scores below 50.0 suggest contraction. The index is expected to post a score of 58.7, which would be an improvement over the last month's reading of 57.4.

[PipDiddy]

The Swissy got trampled on during the greenback's NFP parade last Friday, pushing the USDCHF to a high of 1.0644 during the US session. Meanwhile, the EURCHF spiked back to the 1.4400 area as SNB officials commented on the recent appreciation of the Swissy.

After dipping to a low of 1.4143 last week, the EURCHF bounced up when SNB board member Jean-Pierre Danthine announced that the central bank will take measures to prevent the excessive appreciation of the Swiss franc. He added that the SNB has the tools to achieve exchange rate stability, leading many to think that the central bank could continue to flood the markets with francs to keep its value from rising.

On the economic front, Switzerland is set to release a few top-tier reports this week. It will report its CPI on Tuesday 7:15 am GMT and could print another 0.1% increase in price levels for March.

On Wednesday, Switzerland will report its retail sales figure for the month of February. An annualized 3.8% rise is expected, which is less than the 4.4% growth seen in January. A weaker than expected figure could cause the Swissy to lose more ground against the USD and EUR.

Switzerland will release its unemployment rate on Thursday 5:45 am GMT. Their jobless rate is expected to hold steady at 4.1% during the month of March, implying that their labor market has yet to show some improvements.

No economic reports are due from Switzerland on Friday but SNB board member Danthine is scheduled to deliver a speech at 12:00 pm GMT. If he gives another round of comments concerning the franc's appreciation, the EURCHF could spike even higher while the USDCHF could continue its recent rally. Bear in mind that the US has a bunch of high-impact reports also due this week and these are the ISM non-manufacturing PMI, pending home sales, and FOMC minutes. Be careful out there!

[PipDiddy]

Pretty slow day for trading, as European traders were off enjoying the holidays, wining and dining. The USDCHF traded within a range of just 60 pips, closing 11 pips higher at 1.0626.

At 7:15 am GMT, the Swiss consumer price index is scheduled for release. It is expected that prices rose by 0.1% in March. Still, this probably won't have too much an effect on the markets. Be on the lookout though, for some strong moves as European traders come back from the long weekend. We might see more follow through in the equities markets, and possibly more dollar buying as traders reposition themselves after last Friday's US unemployment report.

[PipDiddy]

The Swissy turned out to be one of the biggest losers in yesterday's trading session. The USCHF ended the US trading session 1.0691, 70 pips higher from its opening price during the Asian session.

Switzerland's consumer price index (0.1% for March) yesterday came in line with expectations but news from Greece once again indirectly pulled the Swissy down. Apparently, rumor broke out that Greek officials wanted to renegotiate the IMF/EU joint aid plan because the rules were too tough for them. At the end of the day, however, the rumors proved to be nothing but rumors when a Greek official denied the news.

Switzerland's economic cupboard only offers the retail sales report at 7:15 am GMT. It is predicted to show that sales rose 3.8% in February, slightly lower than the 4.4% growth seen the month before. If the actual figure comes in higher, the Swissy would probably get some buying support. On the other hand, if the actual figure turns out to be weaker than expected, the USDCHF could retest resistance at yesterday's highs.

[PipDiddy]

The USDCHF rose once again, as the combination of poor Swiss data and risk aversion pushed the pair higher. The pair continued its upward trek, closing yesterday at 1.0733.

Swiss retail sales figures came in slightly disappointing, as they failed to meet consensus of a 3.8% rise last February. Retail sales growth was at just 3.2% on an annualized basis. This led to more franc weakness, allowing the USDCHF to push through the previous day's highs.

No high impact reports coming out today, but watch out for the ECB and BOE statements due during the European session. Chances are, we'll probably see tons of volatility, so be careful! You don't want to get smothered by an avalanche of strong moves!

[PipDiddy]

Thanks to the round of risk appetite late in the US session, the Swiss franc was able to regain the ground it lost early in the day. The USDCHF ended the day at 1.0738, just four pips higher from its Asian session open price.

Yesterday, Switzerland's unemployment report revealed that joblessness in the country from 4.4% in February to 4.2% in March as approximately 7,000 workers were newly hired during the month. However, the seasonally adjusted jobless rate still held steady at 4.1% in March as expected.

No economic reports are due from Switzerland today but stay tuned for SNB Governing Board Member Jean-Pierre Danthine's speech at 12:00 pm GMT. Last month, Danthine refused to comment on the hot topic that is the possibility of central bank intervention given the Swiss franc's appreciation. Instead, he chose to focus on confirming that the SNB's current monetary policy is appropriate for the present market conditions. If he echoes the same remarks during his speech tomorrow, the Swissy could have an opportunity to pare its recent losses.