Daily Economic Commentary: Switzerland

[ForexGump]

The CHF's overwhleming strenght weighed down on the currency yesterday once again. THis took the CHF lower to 1.0727 versus the USD from its open at 1.0661. Are traders getting scared that the Swiss National Bank would finally make real its threats on currency intervention?

It's hard to say where the USDCHF got its fuel to head upwards yesterday give Switzerland's empty economic calendar. Could it be the fear of SNB currency intervention or was it merely a bullish correction from the CHF's recent strength? Still, the dominating market sentiment is poised towards risk taking and if more and more "less bad" data comes out, we might see the USDCHF head to new lows.

[ForexGump]

After rising strongly early in the day, the USDCHF close slightly lower as the franc gained throughout the rest of the trading day. The pair has been testing key support near 1.0600 but cant break past it. Could the threat of currency intervention by the SNB be holding traders back from pushing the franc higher?

Early tomorrow, at 6:00 am GMT, the results of the UBS Consumption Indicator report will be available. The index is expected to have a score of .77, down from the previous reading of .91.

[ForexGump]

The USD/CHF melted to a low of 1.0674 yesterday as the surge in US new home sales triggered a short run of risk tolerance. It recovered some of its losses later in the day as it rebounded above the 1.0700 mark.

For today, the UBS consumption indicator should pump up the vibe for the USD/CHF, which was mostly range-bound for the past week. The report is due at 6:00 am GMT and, although no forecast was provided, the CHF could draw some strength from an improvement over May's 0.77 reading. Other than that, price action in the USD/CHF pair would be largely influenced by changes in risk sentiment resulting from economic reports from the US.

[ForexGump]

The CHF bowed to the USD in yesterday’s trading due to the resumption of risk aversion in the US capitals markets. The CHF, however, closed mixed against the other major currencies.

The UBS consumption indicator for the month of June rose to 0.963 from 0.748. The index is computed from five economic indicators related to consumer confidence, consumer spending, tourism, new car sales, and retail activity. An increase in the index hints a possible rise in Switzerland’s consumption. Despite this gain, the latest reading remains well below the long term average reading of 1.50 for nine months now. The advance in the index was not enough to push the CHF above all the other majors.

No economic updates are scheduled today in Switzerland. The CHF may get some lift against the USD if risk tolerance revisits the US capitals markets.

[ForexGump]

Demand for the world’s refuge currency was at heightened levels yesterday, causing a drop in the CHF’s value. The USDCHF pair opened Asia at 1.0753 and fell sharply as the trading session went by. It closed US at 1.0878, a gain of more than 100 pips.

Given yesterday’s empty economic calendar, it’s no surprise that CHF’s price action is completely driven by degrees in risk tolerance. Today will probably prove no different as no economic report is due for release

Tomorrow, expect to see the July KOF economic barometer at 9:30 am GMT. The KOF economic barometer acts like the country’s leading index as it tries to predict the direction of the economy for the next six months using a combined reading of twelve economic indicators. It is predicted to read -1.46, an improvement from June’s -1.65.

[ForexGump]

The Swiss franc continued its losses versus the dollar and euro yesterday, as it declined slightly against both currencies. This is however, exactly what the SNB wants, as they have been very vocal and aggressive in their efforts to weaken the franc.

At 9:30 am GMT, the KOF Economic Barometer index will released. The report acts as a leading indicator of the Swiss economy and is based on 12 economic indicators. The report is expected to have a reading of -1.45, an improvement from the previous month’s score of -1.65.

Be on your toes for any potential swings in risk tolerance, as this has been driving the markets as of late. Given the recent run of risk appetite, it will be interesting to see whether the CHF can continue to be weak against the USD.

[ForexGump]

Will the SNB cast a currency intervention spell on the USD/CHF and EUR/CHF again? The USD/CHF is tiptoeing towards the 1.0600 area while the EUR/CHF is inching closer to the 1.5000 mark as though challenging the SNB to wield its intervention powers.

Investors continue to buy up the CHF even if the SNB has already made it clear that it will not back down in fighting against the appreciation of their local currency. The reason behind this is that their import-dependent economy would not benefit from a stronger CHF.

As for their overall economic performance, the KOF economic barometer indicated that the recession Switzerland is easing. The reading for June climbed from -1.49 to -0.99, reflecting some signs of optimism for the Swiss economy.

SVME PMI is due at 7:30 am GMT today. It is also expected to post an improvement by rising from 41.8 to 43.6. Later in the week, Swiss CPI and employment data are due for release. This should pose event risks for the CHF, which might experience a few bursts of volatility here and there.

[ForexGump]

The CHF joined the party as it closed positively against the USD and JPY. It, however, fell short versus the other majors.

The Swiss National Bank (SNB) did not interfere and just let the market work its normal course in yesterday’s session despite the CHF’s rise over the USD and the JPY.

The SVME PMI in July rose further in July to 44.3 from 41.8. The consensus was only for a 43.6 reading. The index weighs up the business conditions in Switzerland’s industrial sector. A mark below 50 indicates contraction. Though the industrial activity in Switzerland is still falling, the pace of which is already losing momentum.

The CHF gained ground following the release.

Switzerland’s CPI for the month of July will be published today at 7:15 am GMT. The month-over-month figure is expected to fall by 0.6% after advancing by 0.2% in the month prior. A decline in the index indicates that demand for goods and services for that period fell. Such a drop could be bearish for the CHF.

[ForexGump]

Consolidation was the name of the game yesterday as the CHF just ping-ponged in a tight 70 pip range against the USD. Is the USDCHF setting the stage for round of risk-taking or have sellers finally run out of steam?

Switzerland’s consumer price index was released yesterday. It seems that concerns of deflation is starting to weigh down on the currency as the CPI showed that prices fell 0.7% in July. We’ll have to wait and see what the following months’ CPI reports say to determine whether the result of yesterday’s CPI was merely a fluke or not.

Switzerland’s economic calendar for the day is empty but expect to see the SECO consumer climate report tomorrow at 5.45 am GMT. Still, don’t expect a quiet “Swissy” as there are a lot of high market impact economic data due for release in the other parts of the world.

[ForexGump]

Another round of consolidation for the USDCHF, as price action went up and down but remained within a tight range of about 80 pips.

Later today, the SECO Consumer Climate report will be released at 5:45 am GMT. The report is an index based on a survey that asks consumers to rate current and future business conditions. Its last release 3 months ago came out much worse than expected, posting a reading of -38 (zero is the score that separates optimism from pessimism). This quarter's edition is expected to have a score of -42. Seeing as things have improved over the past 3 months, can we expect a better than forecasted result?

Tomorrow, employment data will be coming out from Switzerland. Forecasts are for the rate to be at 3.9%. I think we may see traders bypass this release, as many will be waiting for the employment data being released from the US later in the day.