Daily Economic Commentary: Switzerland

[PipDiddy]

The USDCHF edged slightly higher thanks to some renewed dollar strength, but it wasn’t enough to completely bust out of its range. With the pair now trading a hair above the 1.1600 handle, what could be in store for us today?

The only piece of data coming out today is the UBS consumption indicator index. Last month, the index posted its highest score in two years at 1.71. Will today’s release show a similar figure? If it does, it may keep the franc from experiencing more losses versus the dollar.

[PipDiddy]

Finally! The USDCHF pair was able to bust out of its range yesterday as risk aversion prodded the greenback higher. However, the pair's rally seemed to lose steam as it slid back below the 1.1600 level during the US session.

Fresh concerns from the euro zone, this time from Spain and not the usual culprit Greece, and the ongoing tension in Korea allowed risk aversion to dominate. Not even the rebound in Switzerland's UBS consumption indicator was able to provide the Swissy support. The reading climbed from 1.68 to 1.76 in April, reflecting an improvement in Switzerland's consumer sector.

No economic reports are due from Switzerland today, which could mean that the Swissy is once again vulnerable to changes in risk sentiment. If risk aversion extends its stay in the market, the USDCHF could zoom past yesterday's high of 1.1697.

[PipDiddy]

As expected, the absence of economic reports yesterday kept the Swissy bouncing its intraday highs and lows yesterday. The USDCHF closed the US trading session at 1.1595, barely changed from its Asian session opening price of 1.1572.

For the mean time, it looks like the usual inverse correlation between the USDCHF and the EURUSD is broken. We saw this yesterday, when the EURUSD found itself falling over a cliff while the USDCHF stayed comparatively calm and within range.

No important data coming out of Switzerland today, so keep a close eye on the preliminary estimate on US’s GDP to determine where the Swissy is headed today!

[PipDiddy]

With the dollar bulls taking a day off, the franc was able to post some decent gains versus the dollar as the USDCHF closed at 1.1565. Can the franc keep up its good fortune? We shall have to wait and see!

After a week in the ice box, we could see some strong moves in franc trading today, as trade balance data and the KOF economic barometer index are due today.

Early estimates are saying that Switzerland posted a surplus of 2.17 billion CHF last April, which would be a nice improvement over the previous month’s figure of 2.01 billion CHF. It’ll be interesting to see whether this can continue in following months, considering all the weakness in Switzerland’s major trading partners (ahem, euro zone countries).

The KOF index is also expected to show improvement, with analysts projecting that the index will rise from a reading of 1.99 to 2.04. This would indicate improving economic conditions. If this report comes in much better than expected, it may just give the franc another lift in todays trading.

[PipDiddy]

"Nope, not yet,” said the Swissy bears last Friday when news broke out that Fitch decided to downgraded Spain's sovereign credit rating. The currency finished the week at 1.1592 against the dollar and 1.4225 versus the euro.

Traders have been very edge when it comes to any debt news from the euro zone, and last Friday's event was no different. Fitch's downgrade of Spain's credit rating to AA+ from AAA sent currency traders and investors scurrying away from euro-related assets like the Swissy into the dollar and yen.

Better-than-expected economic data from Switzerland was unable to keep the Swissy afloat. The KOF Barometer, which is designed to predict the direction of Switzerland's economy by using a combination of several economic indicators, revealed a reading of 2.16 figure. This was its strongest reading since August 2006.

Due to an unexpected rise in exports, Switzerland's trade balance surplus widened to 2.02 billion CHF. The 11.5% increase in exports was largely due to strong demand for Swiss watches from the emerging economies like China and Hong Kong. Hmm, with growing economies developing a taste for luxury, it looks the Swiss won’t have to worry about their exports getting more expensive than the competition.

Too bad the Swiss National Bank thinks otherwise. The Swiss economy’s good performance added to the pressure for SNB to hike rates, but hiking rates would also make the Swissy more expensive. What will be their decision? We’ll know on June 17.

We can get some clues on their decision when Switzerland's GDP and retail sales report publishes this week. Increasing GDP and retail sales signal healthy spending and a healthy economy, which can lead to a rise in interest rates.

[PipDiddy]

I’m sure it comes as no surprise that the newswires were once again silent in Switzerland yesterday. *yawn!* The snooze-fest continued on the charts as the USDCHF traded with a slight downward slope throughout the day, starting out at 1.1598, and finishing off at 1.1553.

For today, keep an eye out for GDP figures which will be available at 5:45 am GMT. Consensus is that the economy’s growth accelerated to 1.8% from 0.6% year on year. If actual results manage to show a better-than-expected improvement, we could see the Swissy gain some more in the coming days.

At 7:30 am GMT, we can take a look at the SVME- purchasing managers’ index numbers, which is forecasted to show a decline from a reading of 65.9 in April to 64.7 in May. The index is considered by many as a leading indicator of Swiss output, and often matches the growth of the economy as a whole. If the PMI numbers disappoint, it may keep the franc from extending its wins against the dollar.

Remember, since data releases only happen once in a blue moon in Switzerland, you can bet traders will be anxious to see what these reports have to say about the country’s performance! Don’t miss out!

[PipDiddy]

Like other major currencies, the Swissy went on a wild rollercoaster ride yesterday. The USDCHF rose as high as 1.1731 during the Asian session, before slumping back down to 1.1574 during the European and US trading sessions.

Once again, the culprit for the Swissy’s drastic moves was the shifts in risk sentiment. At first, the Swissy took a dive on worse-than-expected results on its GDP report, worries over the health of euro zone banks, and fear that France might also lose its AAA sovereign debt rating. However, as the day moved along, these concerns faded and were replaced by a strong case of risk appetite. Supported by better-than-expected data from the US, major currency pairs bounced from their intraday lows against the dollar.

For today, the primary driver of the Swissy’s price action will be Switzerland’s retail sales report. Set to come out at 7:15 am GMT, the retail sales report is expected to show a rise of 3.7% for the month of April. Given how risk sentiment has been driving currencies, a higher-than-expected figure may lead to a rally in the Swissy.

[PipDiddy]

The USDCHF pair seemed to be walking on a tight rope yesterday as it tiptoed around the 1.1540 and the 1.1600 levels. Even though Switzerland saw a weaker than expected retail sales figure, the Swissy was able to hold its ground against the greenback.

Retail sales rose by a mere 1.3% in April, half the expected 3.7% increase and much less than the previously reported 4.0% rise for March. But hey, an uptick is still an uptick, which is why the retail sales report still provided support for the Swissy. Besides, better than expected economic reports from the US helped keep risk aversion in check, allowing the Swissy to stay resilient.

No economic reports are due from Switzerland today but keep an eye out for the ADP non-farm employment report due from the US. A stronger than expected report could signal that the non-farm payrolls report would also print improvements, possibly giving the greenback a boost. Maybe this report could be the catalyst for the USDCHF pair to bust out of its tight range!

[PipDiddy]

Rinse and repeat, my old man used to say! Once again, the USDCHF stayed within a tight range of just 80 pips. When are we going to see this pair break out of its range?

Well, that night might be tonight! For the first time since the start of the week, we have a potential catalyst for big moves in the Swissy. At 7:40 am GMT, SNB Chairman Philipp Hildebrand will be speaking at the Swiss Economic Forum. Now, I don't expect any comments about interest rates, but we may hear him talk about the value of the franc.

If you take a look at a chart of the EURCHF, you'll notice that th franc has been gaining as of late, and is fast approaching the all time low just above the 1.4000 handle. Will Hildebrand deliver us some verbal intervention?

[PipDiddy]

In just one day, the Swissy managed to burst past through the 1.4000 handle against the euro. This came quite a bit of a surprise to traders because this was the level wherein the Swiss National Bank was said to have last intervened. SNB, where are you?

Keep a close eye on those CHF longs. You never know when the SNB would step in to sell their currency to buy up the euro again. If this happens, the USDCHF might be affected and rise as well.

In any case, please do watch out for Switzerland’s consumer price index (CPI) later. Set to come out at 7:15 am GMT, the CPI is expected to show that the average price of consumer goods and services rose 0.1%. Judging from the overall trend, it looks like inflation isn’t a concern right now of the SNB. This gives me reason to believe that an interest rate hike from the bank is still highly unlikely.