Daily Economic Commentary: Switzerland

[PipDiddy]

Sniff sniff... Is that a brewing SNB intervention I smell? With the EURCHF now way below the 1.4000 handle, Switzerland's central bank might be thinking of talking down the franc again.

News of weaknesses in the euro zone's fiscal situation kept pushing the euro lower against the Swiss franc. Now the pair has slid to a new low of 1.3849, prompting many traders to be wary about a possible currency intervention. Do you remember when the EURCHF pair lingered around the 1.4000 handle last month before suddenly spiking up by more than 500 pips? Stay on your toes because another surprise move might be in the cards.

Also keep an eye out for economic reports due from Switzerland. Today, their SECO economic forecasts and CPI are set to be released. Upbeat forecasts for the Swiss GDP, as well as its components, could be bullish for the franc. Meanwhile, their CPI reading for May is expected to show that price levels climbed by a measly 0.1% during the month, a weaker increase compared to the 0.9% rise seen in April. A weaker than expected inflation figure could push the franc lower because it suggests that the central bank is still a long way from raising interest rates.

[PipDiddy]

Well wadya know! It looks like the SNB did intervene in the markets! Unfortunately for the SNB, even though both the EURCHF and USDCHF rose by more than 100 pips in one minute, the move wasn’t sustained and both pairs fell right back into place.

While no one knows for sure who was responsible for this attack… hey who are we kiddin? It had to be the SNB right?! After all, no one can really move the markets that much in one minute! Besides, the SNB does have a history of intervening in the markets. SNB President Philip Hildebrand even said last month that they would take the necessary measures to keep the franc from appreciating. Clearly, Mr. Hildebrand wants to put some bite behind those words.

In other news, the CPI report revealed that inflation remains subdued in Switzerland. The report printed that consumer prices fell by 0.1% last month, after it was expected to rise by 0.1%. On an annualized basis, CPI fell to just 1.1%, down from 1.4% in May. If this keeps up, it may take awhile before SNB decides to hike interest rates. Remember, a central bank can control inflation by raising rates.

Looking ahead, no major reports coming out but be careful out there! Who knows, SOMEONE might just intervene in the markets yet again!

[PipDiddy]

Another round of applause for the Swissy! For the second day in a row, the Swissy managed to edge up higher against both the euro and the dollar on account of risk appetite. The EURCHF made a new yearly low at 1.3734, while the USDCHF closed roughly 50 pips lower from its Asian session opening price.

No data coming out of Switzerland again today so be sure to keep an eye and an ear out for news coming out of major economies, particularly the European Central Bank’s interest rate decision later.

[PipDiddy]

"Take that, Greenback!" yelled the Swissy yesterday as it continued its winning streak. Boosted by risk appetite, Swissy strength carried the USDCHF down to a low of 1.1398 during the US session.

Even though Switzerland didn't release any economic figures yesterday, the Swissy was able to benefit from another run of risk appetite when better than expected economic reports were released from other countries. For one, China boasted that its trade balance grew more than ten-fold as its surplus climbed from 1.7 billion CNY to 19.5 billion CNY in May. Reassuring comments from central bank officials, particularly from the BOE and ECB, also lifted the Swissy's spirits.

Switzerland's economic calendar is empty again today, which means that the Swissy could be driven by changes in risk sentiment. Bear in mind that both China and the US are set to release a bunch of top-tier reports today so the Swissy might be in for a wild ride!

[PipDiddy]

As usual, the franc bobbed its head to the flows of risk sentiment, following the lead of other higher yielding currencies. With the dollar bouncing back on Friday, the USDCHF traded higher to close above the 1.1500 handle. Was this a case of traders taking profits? Maybe, just maybe!

With no super duper big news coming out from other countries, we could see the USDCHF continue to stick within range. The only data coming out today is a report on producer input prices. Analysts expect no change in the prices that producers are paying for their raw materials. This would indicate that inflation remains subdued.

Watch out later this week though, when the SNB will be releasing its interest rate decision. Now, I don’t expect a rate hike, but I do expect comments made by SNB officials regarding the unwanted strength of the franc. Remember, the central bank is notorious for intervening in the markets, so any verbal intervention wouldn’t be too surprising.

[PipDiddy]

Thanks to some positive economic data and improved risk appetite, the Swissy was able to edge higher against the dollar yesterday. The Swissy rallied all throughout the Asian session, but it eventually retraced majority of its gains when bad news regarding Greece’s debt rating hit the headlines once again.

Late in the US session, Moody, a well-known credit rating agency, announced that it decided to downgrade Greece’s government bonds rating to junk status. This puts Greece’s credit rating down by four levels to Ba1.

Economic data was a little bit brighter. Instead of remaining flat, Switzerland’s producer price index for May came out with a 0.3% gain, marking its third consecutive month of increase.

Nothing on Switzerland’s economic calendar today, so pay attention to news coming out of euro zone to find out where the Swissy is headed. Price action has been very choppy as of late so be flexible with your trades! We all know how risk sentiment can change on a dime!

[PipDiddy]

Even though Switzerland didn't release any reports yesterday, the Swissy was able to pocket some gains against the Greenback as risk appetite took hold of the markets. As a result, the USDCHF pair slid sharply from a high of 1.1481 to close at 1.1299.

For today, the sole release on Switzerland's economic agenda is its ZEW economic expectations report. Recall that this index dipped from 53.4 to 40.5 in May as debt woes in the euro zone damaged the economic outlook for Switzerland. Would this report post another decline this June? Stay tuned for the actual results at 9:00 am GMT. If the index sees an improvement this month, the USDCHF could continue sliding down.

Also keep an eye out for today's set of economic reports from the US, which includes their PPI, housing starts, and industrial production figures. Stronger than expected numbers could keep risk appetite in play, pushing the USDCHF even lower.

[PipDiddy]

Yawn... With no major moves in the market, the USDCHF traded within a 90 pip range before trickling slightly lower to close at 1.1301. Meanwhile, the EURCHF continued to drop, and is now chillin’ just below the 1.3900 handle.

Franc bulls were able to withstand the release of the ZEW economic expectations report, which printed a reading of 17.5. This was much lower than May’s score of 40.5, indicating that investors and analysts are less optimistic over the state of the economy. Take note that this marks the second consecutive month that the index posted a significant drop. Could this be an adverse effect of the ongoing debt crisis hitting Switzerland’s neighbours?

We could be in for some major moves today, as we’ve got some red flags going up the economic totem pole. First, at 7:15 am GMT, quarterly industrial production figures will be available. Production is projected to have fallen by 6.3% during the first quarter, which would be a drastic turnaround from the 6.4% increase posted during the last quarter of 2009.

Watch out at 7:30 am GMT, as the Swiss National Bank will be releasing its interest rate decision and monetary policy statement. Now, the base line rate is expected to stay put at 0.25%. What I’m more interested in is whether SNB officials will drop any comments regarding the persistent strength of the franc. You should know that the SNB is notorious for intervening in the markets, both with words and action. This press release could be another opportunity for them to do some jawboning.

[PipDiddy]

Surprisingly, it was the Swissy that garnered much of traders’ attention yesterday. Thanks to some extremely hawkish statement from the Swiss National Bank (SNB), traders bought up the Swissy like it was made of gold and took it higher against both the dollar and the euro.

According to the SNB, they have decided to keep rates at 0.25% but, to the surprise of everyone, they dropped their commitment to prevent the appreciation of their currency. In fact, they even indicated that the franc’s strength has been offset by the improvement in demand for Switzerland’s export. Within minutes after the statement, the Swiss franc rallied across the board.

No data on Switzerland's calendar today but do be careful because it is a Friday! We could see the Swissy retrace some of its gains on account of profit taking as traders close shop for the week.

[PipDiddy]

The US dollar and the Swiss franc had a really tight match last Friday, keeping the USDCHF just a few notches close to the psychological 1.1100 mark. The lack of high-impact reports from the US and Switzerland left the pair almost motionless then.

Today, SNB Chairman Philipp Hildebrand is scheduled to give a speech at 4:00 pm GMT. Listen closely for any talk of currency intervention since this could have a huge impact on the Swiss franc’s movement. Last week, the SNB mentioned that they are no longer worried about their currency’s appreciation, which set off a strong franc rally. Similar remarks from Hildebrand could push the USDCHF and EURCHF even lower.

On Tuesday, Switzerland will release its trade balance for May. Their trade surplus is estimated to narrow slightly from 2.02 billion CHF to 1.97 billion CHF as exports dipped during the month. But if the actual figure posts an upside surprise, the franc could keep rallying against its counterparts.