Daily Economic Commentary: Switzerland

[PipDiddy]

Thanks to a slight improvement in risk sentiment, the Swiss franc was able to pocket some gains against the Greenback during yesterday's trading. However, price action was a little more volatile than usual as USD/CHF spiked to a high of .9609, dipped to a low of .9530, before closing at .9560.

Swiss CPI missed expectations for the month of August as it stayed flat during the period instead of rising by 0.1%. On an annualized basis, Swiss CPI is down by 0.5% last month.

This release triggered a Swissy selloff during the London session, but these losses were quickly recovered as the franc got a boost from risk appetite. As it turns out, market watchers are feeling optimistic about prospects of further easing from several major central banks as they believe that the global economy needs to be propped up by more stimulus.

There are no reports due from Switzerland today which means that the Swissy could be vulnerable to risk sentiment. Note that the ECB and BOE are set to make their rate statements today and that the U.S. is set to release its ISM non-manufacturing PMI. Dovish statements or weaker than expected economic figures could set off another round of risk aversion, which might be negative for the franc.

[PipDiddy]

The Swissy pulled a Dr. Jekyll and Mr. Hyde yesterday as it strengthened against the dollar but weakened against the euro. USD/CHF dropped 25 pips to .9535, while EUR/CHF continued its unusual rally and ended 9 pips higher at 1.2050.

Word on the street is that the SNB may move the EUR/CHF peg higher, which explains why EUR/CHF has been unusually lively as of late. Rumor has it that the central bank may lift the floor from 1.2000 to 1.2200.

If you think about it, there really is a solid case for a higher peg - Switzerland has been seeing weak economic activity and inflation lately, and a weaker franc could go a long way in boosting exports and diminishing threats of deflation.

In any case, keep an eye on the Swissy today! Aside from rumors of a shift in the SNB's cap, the Swissy may react strongly to the upcoming foreign currency reserves report, which last revealed reserves of 408.6 billion CHF. If you want this report fresh off the press, catch it at 7:00 am GMT.

[PipDiddy]

Finally some action on EUR/CHF! After breaking out of its slumber last Thursday, EUR/CHF followed up with a 100-pip rally from the 1.2050 area to the 1.2150 mark last Friday before closing slightly above the 1.2100 handle. USD/CHF, on the other hand, slid down the charts and closed at .9450.

Swiss foreign currency reserves jumped to 418.4 billion CHF in August while the July figure was revised up from 406.5 billion CHF to 408.6 billion CHF, showing that it was getting more and more expensive for the SNB to hold on to its EUR/CHF peg. A closer look at the figures would reveal that foreign reserves holdings are currently around 70% of their total output, prompting traders to speculate that the SNB might no longer be able to afford to keep intervening in the foreign exchange markets later on.

Although this report triggered a strong Swissy selloff during the London session, the franc was able to bounce back against the U.S. dollar during the New York session when the U.S. printed weaker than expected jobs data. It turns out that net hiring came in below expectations and even below the 100K threshold for August, sparking QE3 speculations yet again.

In terms of economic reports, the Swissy's schedule is practically empty for the entire week, with the exception of the SNB monetary policy statement set on Thursday. With that, keep your eyes and ears peeled for any updates regarding the SNB's currency intervention moves because these could have a huge impact on franc pairs.

[PipDiddy]

The Swissy couldn't make up its mind yesterday as it went one way against the euro and the other way against the dollar. EUR/CHF backed away from the 1.2100 handle as it settled 8 pips below its opening price at 1.2074 after reaching an intraday high of 1.2120. Meanwhile, USD/CHF recorded a 28-pip gain as it ended the day at .9463.

Bearishness for the Swissy seems to be tapering off now that it's starting look as though the SNB will stick to its 1.2000 peg on EUR/CHF. According to a Reuters poll, 18 out of 20 economists believe the central bank will keep the cap on the franc at 1.2000 even if Greece were to get booted out of the euro zone. How's that for faith in the SNB, eh?

That being the case, its possible that EUR/CHF may continue to slide back down. Who knows, it may even return to trading just above the 1.2000 handle!

No reports from Switzerland today, so sit tight and check out what the U.S. and euro zone have to offer!

[PipDiddy]

Just like the other European currencies, the franc gave the scrilla a beating in yesterday’s trading action. USD/CHF set a new three-month low, falling 73 pips to finish at .9390.

Nothing lined up from Switzerland today, but make sure you pay close attention during the London session, as the German high court will be making its ruling on the constitutionality of the ESM. This will most likely dictate risk sentiment and price action today, so be on your toes!

[PipDiddy]

It seems the Swissy still can't decide if it wants to head over to the bull camp or chill with the bears. It strengthened against the dollar as USD/CHF closed 11 pips lower at .9379 after tapping an intraday low of .9341. Meanwhile, EUR/CHF continued its climb as it finished 15 pips higher at 1.2091.

Today, we've got a rare high-caliber event on the calendar for Switzerland as the SNB is set to hold its quarterly monetary policy assessment at 7:30 am GMT. It's likely that no changes will be made to the SNB's benchmark interest rate, which is already at zero. Also, most say we can expect SNB President Thomas Jordan to reaffirm the central bank's stance on defending the EUR/CHF peg at 1.20.

If that happens, might it lead to a drop in EUR/CHF? Perhaps! The pair has been hanging around the 1.2100 handle these past few days thanks to euro strength, but also partly because rumors have been going around that the SNB may re-peg EUR/CHF... possibly at 1.2200!

In any case, it will be very interesting to hear what Switzerland's policymakers have to say about the current state of the economy, seeing as it hasn't been too healthy as of late. I can't wait to see their new economic forecasts!

[PipDiddy]

The Fed’s QE3 program triggered a wide-reaching case of dollar weakness, which the Swiss franc thoroughly enjoyed. USD/CHF, which had begun the day at .9379, closed the U.S. trading session 31 pips lower at .9379.

Economic data was positive for the Swiss franc too. The Producer Price Index that was released yesterday beat expectations. It came in with a 0.5% gain, opposite the 0.2% decline the market had initially predicted. It was also significantly better than the 0.3% decrease the month before.

In other news, the Swiss National Bank (SNB) announced in its interest rate decision that it would maintain the 1.2000 EUR/CHF floor. The central bank also reiterated its pledge to defend the level by purchasing “unlimited quantitates” of foreign currencies. The SNB’s foreign exchange reserve now stands at 446 billion USD, 64% higher from where it was at the beginning of the year.

No major data releases due in Switzerland today but there are a lot of tier 1 events scheduled to happen in the U.S like the CPI and the retail sales report. Keep an eye out for those!

[PipDiddy]

On Friday, USD/CHF continued to drop on the charts like it's hot! The pair opened at .9348 and traded lower all the way down to .9239 before closing the day at .9270. Way to go, franc!

There weren't any economic reports from Switzerland. However, it would seem that dollar bears were still aplenty in the markets after the Fed's very dovish FOMC statement.

Once again, the docket is clear for reports for the Swiss franc today. Will it be able to extend its gains? The answer would most probably depend on market sentiment. If risk appetite continues, then we would likely see USD/CHF tap a new monthly low. If not, I won't be surprised to see the pair trade higher.

[PipDiddy]

With no big data on tap, USD/CHF pretty much stuck within range and consolidated yesterday. USD/CHF closed at .9280, just 3 pips above its opening price.

Once again, no hard data lined up for us today from Switzerland, but that doesn’t mean you can sit back and play video games all day. Make sure you stay on your toes, as you never know what might rock the markets!

[PipDiddy]

Bad news from Switzerland spelled trouble for the Swiss franc yesterday. Just like most higher-yielding counterparts, the currency suffered a loss to the dollar. USD/CHF closed the day higher at .9285 after opening at .9273.

SECO downgraded it's growth forecast for Switzerland. After initially predicting GDP to come in at 1.4, growth for 2012 is now seen to come in at 1.0%.

Our forex calendar is now blank for top-tier reports for the franc. This probably means that we'll see market sentiment dictate the currency's price action in today's trading. With that said, keep in mind that the franc usually rallies when risk appetite and doesn't do so well when risk aversion is in play. Good luck!