Daily Economic Commentary: Switzerland

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Daily Economic Round Up of data from Switzerland!

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The “Swissy” went range bound mode yesterday when it depreciated to the 1.0900 price level during the Asian session and then taking back all of its lost ground as the Euro session went by. No economic data was released yesterday.

The UBS consumption indicator will print later at 6 am GMT. The report basically acts like a leading index because it combines five economic indicators, some previously released, to determine the economy’s direction for the next few months. It uses indicators related to the following: consumer confidence, spending and retail activity.

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The UBS consumption indicator slid from 0.91 to 0.77. The indicator, which resumed its downward trend, was reported to have fallen below its long-term average. This suggests that Swiss consumer spending is still rising slightly but the outlook is becoming increasingly glum.

PMI or purchasing managers’ index is due at 3:30am GMT today. An improvement from 39.8 to 41.1 is expected. This index has been gradually increasing since February this year and another uptick could allow the CHF to recover its losses against the USD from yesterday.

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CHF managed to gain massive ground versus the USD, rallying almost 200 pips yesterday! The prime suspect, as usual, was increased risk tolerance. The initial CHF buying frenzy has now abated though so unless risk appetite persists, the CHF would most likely trade side wards once again.

Data that came out of Switzerland provided support for the CHF as well. SVME’s PMI for June printed a reading of 41.8, an improvement from both the consensus and last reporting period’s figure. Despite still being less than 50 (meaning the industry is still contracting), this indicates that the recession’s grip on the economy is slowly easing.

No hard hitting economic data due for today but expect to see the Swiss consumer price index tomorrow at 7:15 am GMT. Prices are predicted to have remained flat in June.

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The USDCHF pair inched up slowly yesterday, pairing off the gains the CHF made against the USD the day before. This was probably due to a combination of reports that came out from the US, as well as comments made by SNB Board member Thomas Jordan.

Jordan said that the SNB would routinely implement currency intervention to stop the CHF from appreciating. This move, where the SNB buys USD and EUR in exchange for local currency, is aimed at keeping the CHF at a favorable level. Normally, when there is speculation that the SNB will do such a move, the CHF suffers and weakens. One thing to note is that apparently, the threshold price for the SNB is 1.50 CHF per EUR (EURCHF = 1.50). Last week, when the EURCHF was approaching this price level, buyers brought up the price on speculation that the SNB was interfering once again.

Jordan did not say specifically at what level the SNB would implement currency intervention. In fact, the SNB has only admitted to one intervention, when they announced the plan on March 12. Jordan did say however, that the SNB was in a position of power where they could implement quantitative easing in order to create more liquidity in credit markets.

Later today, the Swiss Consumer Price Index will be released at 7:15 am GMT. It is expected that consumer prices to remain unchanged from May to June.

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After bowing down to the USD on weak NFP data, the USD/CHF ended the week in range-bound movement as US traders sauntered off to an early weekend. Risk aversion was the main factor in driving the CHF lower - to the delight of the SNB - but would the same risk sentiment linger in the currency markets this week?

Data from Switzerland this week is sparse, as usual. Only the unemployment rate, which is due on Wednesday 6:45am GMT, is on the economic calendar. It is expected to climb from 3.5% to 3.6% in June. The jobless rate in Switzerland has been steadily increasing since November 2005, suggesting that labor conditions continue to worsen. This implies that further weakness may be in the cards for nation's overall economic condition.

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Despite being put on a leash by the Swiss National Bank in the past weeks, the CHF still showed its might as it looked over the other “majors” yesterday. The only player which showed a little bit of resistance was the AUD. The AUD was quick on its feet and managed to close just above the opening price after being pulled down.

No economic updates were released yesterday. Today will be quiet as well in Switzerland. The CHF would mostly be just driven by the economics of its counterparts.

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The CHF once again held its range versus the dollar once again yesterday! It prevented the USD from advancing past 1.0920 but still fell short to breaking 1.0800.

Today will be the only exception to Switzerland’s completely bare economic calendar. At 4:45 am GMT, we will see the nation’s unemployment rate. It is predicted to have hit 3.6% in June, up from the 3.5% unemployment rate in May.

Well, that’s pretty much it for Switzerland. Unless we see any major shift in sentiment, the currency’s ranging behavior would probably hold. With the G8 meetings underway, it’d be best to keep an eye and an ear out for any sentiment change... just in case!

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More range bound motion from the Swissy, as it dropped a couple of pips against the USD. The pair rose to 1.0897, just 20 pips above its opening price.

A Swiss unemployment report was released yesterday, which indicated that the country’s unemployment rate hit 3.8%, the highest level in more than 3 years. This was higher than the projection of 3.6%. Still, there wasn’t much effect on Swiss franc trading as traders had probably priced this in when other employment data was released.

Nothing else coming out from Switzerland for the rest of the week. The USDCHF pair has been trading largely on risk sentiment and on any news regarding currency intervention. Watch out for news coming out from the G8 Meetings which may give fuel for risk sentiment to drive the pair in either direction.

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The USD/CHF found itself tumbling down the hill as US weekly jobless claims were better than expected. This set off a surge in risk tolerance, which caused investors to flee to riskier assets and dump the USD along the way. The USD/CHF pair is currently back on its feet and dusting itself off, but is it strong enough to climb back up?

With the usual absence of economic reports from Switzerland, the USD/CHF is once again left moving to the tune of risk sentiment - which is mostly dependent on US economic data. Investors are starting to realize that this week's jobless claims is a misleading gauge of the labor market situation, considering that continuing claims surged to a record high. Could we catch them flocking back to the safe-haven USD today?

The USD/CHF is currently closing in on the 1.0800 mark. Being a psychologically significant level, it could serve as resistance for the pair. But if the pair's upward momentum is strong enough to pierce through, then the pair could resume its range-bound movement from 1.0830 to 1.0950.