Daily Economic Commentary: Switzerland

[PipDiddy]

With its European buddies taking a hit, the franc, as usual, followed their lead. Dollar bulls helped fill the gap on the USDCHF, allowing it to close higher for the day. After opening at 1.1060, the pair finished at 1.1129.

No major news came out from Switzerland yesterday, but SNB Chairman Philipp Hildebrand did drop some pretty amusing comments. He said that one of the problems why European banking stocks were undervalued was because of the “insufficient transparency” with regards to their balance sheet statements. Hmmm… isn’t Switzerland notorious for banking secrecy? Ha!

Hildebrand also repeated statements that were made last week, saying that the outlook for the Swiss economy looks pretty good right now. He did point out though, that the economy is still exposed to potential risks due to the ongoing European debt crisis. He said that if these problems get stuck like a Justin Beiber hit and have a “Last Song Syndrome”, it could lead to potential deflation as the Swiss franc continues to appreciate. If that happens, the SNB will have to take matters into their owns… which means that they wont let the franc appreciate!

If you ask me, all this verbal intervention is having no effect whatsoever. As I look at the charts of the EURCHF, the pair is now hitting all time lows. So much for “taking the necessary measures to ensure price stability.”!

Swiss trade balance figures will be released at 6:15 am GMT today. The report is projected to show a surplus of 1.97 billion CHF for May, slightly less than April’s figure of 2.02 billion CHF. With the franc appreciating so much in recent weeks, I wouldn’t be surprised if we saw a weaker than expected number. Remember, a stronger currency makes exports more expensive relative to other competing nations. With the euro tanking in the past couple of months, the euro zone may have taken away from some of Switzerland’s exports.

[PipDiddy]

Extra! Extra! Read all about it: the Swissy posted a new yearly low against the euro yesterday! Yep, you heard me right… the Swissy bulls trampled all over the euro again and marked their fifth consecutive win! With the Swiss National Bank absolutely in sight, we could see the EURCHF hit 1.3500 today.

Data released was mixed. While the Swiss trade balance came below expectations with only a 820 million surplus for May, April’s figure was revised up to 2.06 billion CHF from 2.02 billion CHF.

Switzerland’s economic cupboard has nothing to offer today, so keep a close eye on data from euro zone to determine where the Swissy is headed. If more bad news come out from euro zone, we could continue to see traders and investors exchange their euros for the Swissy.

[PipDiddy]

Even though Switzerland didn't release any economic reports yesterday, the Swissy was still able to sneak in some gains against the Greenback. Because of that, the USDCHF was unable to head any higher and kept its head below the 1.1140 level.

Dovish comments from the US Fed officials dampened demand for the Greenback, allowing the Swissy to take the upper hand. But the lack of Swiss economic figures on the calendar kept its gains limited.

Today, Switzerland's economic agenda is empty again so keep an eye out for other market events and economic reports that could have an impact on the USDCHF's movement. Take note that the US is set to release their weekly jobless claims report and durable goods orders figures at 12:30 pm GMT. Worse than expected figures could keep traders away from the Greenback, allowing the Swissy to pocket more gains.

[PipDiddy]

Once again, the USDCHF traded within a tight range, although it trickled lower by the end of the day. The pair closed just about 30 pips lower to finish at 1.1025.

We may see more of the same boring, range like trading from the USDCHF. Keep an eye out for the SNB quarterly bulletin coming out at 9:00 am GMT. Now, don’t expect much of a reaction to this report as it basically contains information that was available a couple of weeks ago when the bank made its monetary policy statement.

[PipDiddy]

The Swissy did it again! After ranging for the better part of last week, the Swissy just burst with life on Friday. The Swissy closed out with a 100-pip gain over the dollar while also clocking in 55 pips against the euro.

The strength of the Swissy mostly came from Switzerland’s National Bank (SNB) when it said that the deflation risks have mostly disappeared. This gave rise to the speculation that the SNB will stop intervening in the markets any longer to keep the Swissy’s value low against the euro.

According to the calendar, Switzerland presents no red flags in terms of economic reports this week. Still, this doesn’t mean that the Swissy’s price action will be slow. There are a lot of high-profile reports coming out of the US, which could indirectly move the Swissy!

[PipDiddy]

After starting the day strong, the Swissy eventually retreated and returned some of its gains against the Greenback. As a result, USDCHF rose from an intraday low of 1.0817 and closed at 1.0882.

Switzerland didn't release any economic figures yesterday. Today, only one report is on their schedule and that's the UBS consumption indicator. The report could post another rise, up from its previous 1.76 reading in April. If it does, it would mark its fourth month in consecutive increases and most likely boost the Swissy. Watch out for the release at 6:00 am GMT.

Also stay tuned for the release of the CB consumer confidence index from the US at 2:00 pm GMT. Being the only red flag on today's economic schedule, this report could cause some volatility in the markets. A slight dip is expected but if the actual figure posts an upside surprise, Greenback strength could resume.

[PipDiddy]

There’s no stopping the franc eh? The franc continued its dominating ways, as it pummelled its way to new all-time highs against the euro. EURCHF is now trading at the 1.3200 handle. Meanwhile, the franc even able to overcome broad dollar strength, as USDCHF closed at 1.0808, about 100 pips lower from yesterday’s highs.

For those of you who haven’t been keeping track, EURCHF is now 900 pips down from its opening price in June. Where the heck did the SNB go?! In the past, the central bank would NEVER allow the franc to appreciate too much. It seems that they’ve abandoned their intervening ways and will keep allowing the franc to appreciate.

It’s not like the franc’s appreciation versus the euro has been unwarranted though. Because of all the debt concerns from euro zone countries, investors have decided to unwind their positions in euro denominated assets and move them to the franc. Also, according to UBS, the Swiss economy is slightly improving, as the consumption index printed a reading of 1.74, up from last month’s revised score of 1.73.

For today, look out for the KOF leading indicators report, due at 9:30 am GMT. The index, which tries to measure the direction of the Swiss economy, is projected to print a 2.16 figure, which would represent no change from the previous month’s release. Still, this would indicate improving conditions. If the report were to come out much better than expected, we may just see the franc continue its winning ways.

[PipDiddy]

Seven against the dollar, eleven versus the euro. Those numbers represent the number of consecutive days the Swissy has gained over those currencies. It look likes the perception that the SNB has backed off its intervention activities has proven to be a boon for the Swissy, making it the recipient of the “Best Performing Currency Award” amongst all the other major currencies for the month of June.

Why is the Swissy rallying? Before the most recent financial crisis, Switzerland has always been considered as a politically neutral nation due to its bank secrecy laws. This gave it a “safe haven” status, much like how the dollar is currently seen. With the uncertain economic outlook, the debt problems euro zone is facing, and Switzerland’s relatively better economic standing, it looks like investors starting to move their funds into Switzerland, which has caused the Swissy to appreciate these past few weeks. For how long will this last? I don’t exactly know, but the Swissy’s changing role in the forex arena is something to keep an eye on.

In any case, let’s move on to some economic data shall we?

Yesterday, the KOF leading index was released. The index, which is designed to predict Switzerland’s economy over the next six months, printed a reading of 2.25, significantly higher than he 2.16 initially predicted. . Positive readings mean that the country’s economy is expected to improve further, while negative readings indicate otherwise. This added more evidence that Switzerland is faring much better than other European nations.

Up ahead, we’ll be seeing Switzerland’s manufacturing purchasing managers’ index at 9:30 am GMT. The manufacturing PMI is slated to decline to 53.4 from 54.0. Although predicted to fall, it still means that Switzerland’s manufacturing sector is improving because the reading is above 50.0 – the figure which divides growth from contraction.

[PipDiddy]

You win some, you lose some. That's probably what the Swiss franc thought when it scored some gains against the Greenback but lost ground to the euro. At the end of the day, USDCHF closed at 1.0677 while EURCHF landed at 1.3282.

Switzerland's SVME PMI hit the mark as it dipped from 66.4 to 65.7 in June. This reflects how the industrial expansion slowed a bit during the month. But compared to the much weaker manufacturing reports from the US, Switzerland's manufacturing industry seems to be more stable. This enabled the Swiss franc to take advantage of dollar weakness yesterday.

However, the franc's performance paled in comparison to the euro, which enjoyed huge gains after demand for Spanish bonds came in stronger than expected.

Switzerland won't be releasing any economic reports today, which means that the movement of USDCHF will largely be affected by releases from the US. Stay tuned for the release of the NFP report since a weaker than expected figure could allow the franc to beat down the Greenback.

[PipDiddy]

Make way for the psychics! The SNB’s relaxed stance on their currency boosted the franc early last week, but the poor economic reports from the US stole the spotlight from the euro debt crisis and increased the demand for the euro, the franc’s major counterpart. EURCHF closed the week at 1.3365 after dipping to as low as 1.3073 last Thursday. Looks like they didn’t need to intervene after all!

The SNB got a break from the markets when currency moves went exactly how they wanted it. The question is, will the franc give back its gains or will it continue to rise due to economic results? Today, annualized retail sales data for May is due at 7:15 am GMT. A figure exceeding the 2.7% expectations would mean that consumer demand is healthy despite their expensive currency.

The monthly CPI for June is also due tomorrow at 7:15 am GMT. After decreasing by 0.1% last May, the data is expected to increase by 0.1%. Will a better than expected figure be enough for an interest rate hike for the low yielding currency? Find out tomorrow!