Daily Economic Commentary: Switzerland

[ForexGump]

The CHF was able to stage a weak rally yesterday as economic data that came out of Switzerland showed improvement. The USDCHF opened Asia at 1.0650 and ended the US session a few pips lower at 1.0625.

Switzerland’s trade balance, which has been steadily rising in the past few months, showed another surplus. It printed 2.35 billion franc, higher than the 1.79 billion initially expected. The ZEW Economic Expectation report showed that investors and analysts are now more optimistic about the economy. It reported 18.6, an improvement from last reporting period’s 0.

No economic reports due today so expect the CHF to be primarily driven by degrees in risk appetite.

[ForexGump]

The CHF went up like Mr. Fredricksen’s house in UP last Friday, as the CHF hit a 2 week high against the USD. The pair closed trading last week at 1.0572.

The franc rallied as the USD fell across the board on increased optimism. European stocks rose, while Euro zone PMI reports all came out slightly higher than expected.

We could see some extra volatility tomorrow in CHF trading, with the UBS Consumption Indicator and Swiss employment level data due tomorrow at 6:00 am and 7:15 am GMT respectively. Later on, Swiss National Bank Vice-Chairman Philip Hildebrand and member Thomas Jordan will be speaking at separate events. Given the recent rise of the CHF lately (check out my buddy Big Pippin’s blog for a look at the USDCHF's recent downtrend!), could we hear any hints of currency intervention by these SNB officials?

[ForexGump]

The USD/CHF tested the resistance at 1.0630 several times yesterday. There just wasn't any economic data fueling the pair to make any strong moves. A little more action is in the cards for today as Switzerland unloads a set of economic reports later on.

Switzerland is set to release its July UBS consumption indicator early today. This composite index, which stood at 0.96 in June, is due at 6:00 am GMT. If the index posts a notable improvement, then the CHF might be able to show some resilience against the USD. At 7:15 am GMT, the Swiss employment level will be reported. The employment level is projected to be at 3.96 million, same as in the past three months.

Risk appetite could make its way back in the currency market today as consumers in the US are expected to show more confidence in the US economic outlook after seeing a drop in unemployment rate and rallies in the equity market. But with a couple of members of the SNB set to deliver speeches for today, might we hear of currency intervention pulling down the value of the Swissy?

[ForexGump]

The CHF scored one against the USD during the US session. Thanks to the better-than-expected consumer confidence reading which prompted investors to move their money in higher yielding assets like the CHF.

The UBS consumption indicator in July moved lower to 0.77 from the previous month’s 0.95 mark. This latest reading is well below its long-term average of 1.50. Though, the score still suggest an expansion, albeit meek, in Switzerland’s private consumption.

Separately, Switzerland’s employment level during the second quarter of the year came in at 3.95 million which is slightly below the previous month’s 3.96 million level.

Meanwhile, the SNB launched yesterday the Swiss franc reference rates for the financial markets which is supported by the repo interbank market data given by Eurex Zurich. According to the bankers, the creation of the reference rates would allow for a “risk-neutral franc yield curve.”

No economic reports are due today in Switzerland. The CHF may just be range bound given today’s lack of economic flow.

[ForexGump]

The CHF retreated back to the 1.0700 price level yesterday as good data coming out of the US failed to provide support for the currency. It has been two days now and the usual “risk-appetite-aversion” dynamics did not materialize. Have traders over-extended themselves?

No economic data due for today but expect to see the KOF Economic Barometer at tomorrow at 9:45 am GMT. It is predicted to improve to -0.59 from -0.99 the week prior. The report is a combined reading of 12 economic indicators, some previously released, to determine the general direction of Switzerland’s economy. Also, expect to see UDSCHF to consolidate a bit as traders sit on the sidelines prior the release of the US preliminary GDP report.

[ForexGump]

The Swiss franc sliced through the USD like it was cheese, as the USDCHF dropped late in the US session. The extreme volatility caused the pair to hit a new yearly low at 1.0531, before it cooled off and closed trading at 1.0581.

At 9:30 am GMT, the KOF Economic Barometer will be released. The index is expected to show a major improvement from last month's reading of 0.99. It is forecasted to have a score of 0.59 for the month of August.

Where will trading take the USDCHF pair today? Will we see the pair try to establish a new yearly low? Or are the fireworks over and will we see trading pass slowly by as we end the week?

[ForexGump]

Tired of consolidation? This week's economic reports from both Switzerland and the US could turn the volatility up a notch for the USDCHF.

A major event risk for the pair is Switzerland's GDP, which is set for release on 5:45 pm GMT Tuesday. The Swiss economy is still expected to be deep in the recession since the consensus for their GDP is at -0.9%. The SVME PMI is also due on the same day. This report should be a little more optimistic as the indicator is projected to climb from 44.3 to 47.1. On Friday, Switzerland's CPI data is due. Price levels are expected to be up by 0.3% in August after sliding down by 0.7% in July.

Each day is also loaded with economic reports from the US and these should allow the USD/CHF to take a more definite direction this week. The pair could make some major breakouts in the middle of the week as the US releases ISM manufacturing PMI, pending home sales, FOMC minutes, and the NFP report.

[ForexGump]

The CHF closed the day mixed against its counterparts amidst yesterday’s chaotic session. A 6.7% drop in China’s Shanghai Index sent shock waves across the globe, hurting most of capital markets even Switzerland’s.

No economic reports were due in Switzerland yesterday. However, the confusion in the global markets for the reason mentioned above spurred investors to move back to the safety of the USD. Other currencies like the CHF lost its attractiveness as a result. It was only able to rebound following the better-than-expected Chicago PMI.

Today will be a big day in Switzerland with the release of its second quarter GDP at 5:45 am GMT. Switzerland’s economy is seen to contract further by 0.9% after already losing 0.8% in the first quarter. Any decrease in the country’s broad economic measure would likely have a negative impact on the CHF.

The SVME PMI is also due for release at 7:30 am GMT. The index is anticipated to rise to 47.1 from 44.3. While the expected number is still below 50.0, which indicates contraction, any jump in the figure could provide some short term minor support to the CHF.

[ForexGump]

Poor Swissy. Despite optimistic results from economic data that was released yesterday, the currency was still sold off versus the dollar.

The country’s GDP report for the second quarter of 2009 showed an unexpected surprise. It reported that Switzerland’s economy only contracted 0.3% and 0.9% like initially expected. The SVME PMI, which assesses whether the manufacturing industry is growing or not, printed a better-than-predicted reading of 50.2. The consensus only stood at 47.1.

Clear economic calendar ahead of Switzerland today so the CHF’s price action would be primarily driven by currencies paired against it and of course, degrees in risk tolerance.

[ForexGump]

The Swissy was able to take advantage of USD weakness midway through the US session after consolidating for most of the day. The USDCHF pair closed the day at 1.0605.

Nothing on the economic cupboard today for Switzerland. Be wary of news coming out from the Euro zone (rate decision and retail sales) and the US (unemployment claims). These reports could create some noise in the markets.