Daily Economic Commentary: Switzerland

Trading Discussion News and Economy
367

Wham, bam, thank you Uncle Risk Aversion! Okay, that doesn’t rhyme, but hey, that was the name of the game yesterday! Due to some earth-shaking, market-moving events that took place yesterday, safe haven currencies like the franc flew up the charts. Just look at EUR/CHF, which dropped over 150 pips from its opening price to end the day at 1.3330.

This was a classic case of, “even though there’s no data coming out, you should ALWAYS be aware of what’s happening in other markets.” Tension between North and South Korea and European sovereign debt concerns weighed heavily on the markets. It’ll be interesting to see how traders react ahead of Thanksgiving weekend. Will they continue to take off risk before enjoying the weekend? Or will they leave some turkey on the table and see what happens?

368

Yodel-eh-eeeh-whoohoo! The Swissy posted its fourth consecutive win against the euro as it closed the day at 1.3279, piling up its gains to 334 pips this week. It also bagged 8 pips from the dollar as USD/CHF ended the day at .9961.

  If you remember what I said on Monday, we’ll get dibs on [Switzerland](http://www.babypips.com/school/switzerland.html)’s labor market later at 8:15 am GMT with the market expecting to see that 3.98 million people were [employed](http://www.babypips.com/forexpedia/Employment_Level_-_Switzerland) in the third quarter.

So aside from gauging market sentiment, make sure you don’t miss the report if you’re planning to trade the Swissy!

369

USD/CHF seems to be catching its breath after its recent rallies. The pair consolidated at the top of its range, which just happens to be around the psychological 1.0000 handle. Would it be able to hold on to parity?

Consolidation was the name of the game for USD/CHF yesterday as U.S. traders left their trading desks to enjoy the Thanksgiving holiday.

Switzerland released its employment figures, which came in better than expected. It turns out that the number of people employed climbed from 4.06 million in the second quarter to 4.08 million in the third. Today, they are set to release the KOF economic barometer for November at 10:30 am GMT. The reading is expected to drop from 2.17 to 2.09 during the month, but an upside surprise could allow the Swissy to grab more gains against the Greenback.

370

The franc’s price action last Friday was as mixed as a bowl of M&Ms when it gained on the euro but lost ground against the greenback. EUR/CHF dropped by 81 pips at 1.3284 while USD/CHF rose by 22 pips at 1.0028.

While the franc’s price action was mainly driven by risk aversion, Switzerland’s economic report also came into play. Last Friday the country’s KOF economic barometer was released. The data printed at 2.12, which is a bit better than the expected 2.09 index number, but is also lower than October’s 2.16 figure.

This week the franc will have more chances at making its own headlines when a list of economic reports is released, starting with the UBS consumption indicator tomorrow at 7:00 am GMT. The SVME manufacturing PMI will follow suit on Wednesday at 8:30 am GMT, then the third quarter’s GDP on Thursday at 6:45 am GMT and September’s retail sales at 8:15 am GMT. The last act will be on Friday when November’s CPI will be released at 8:15 am GMT.

Stick around for these reports, will ya?

371

Action on USD/CHF in yesterday’s trading was as intense as Sunday’s football match between the Texans and the Titans. The pair dipped to .9988 after it opened the week at 1.0032. It then hustled to 1.0043 before slipping back down to close the day at 1.0001 in favor of the Swissy.

Risk aversion made it a tough bout between the two safe-haven currencies. But against the euro, it was like taking candy from a baby for the Swissy. EUR/CHF went on a strong downtrend all the way to its closing price of 1.3123 as soon as it opened at 1.3325.

Our economic calendar shows that the UBS Consumption Indicator for October is due later at 7:00 am GMT. A reading higher than the previous usually has a bullish effect on the currency. However, don’t be so sure of the Swissy even if the report prints a value better than its 1.7 figure for September because market sentiment will most probably dictate Swissy’s action on the charts today.

372

Not today, buddy! Switzerland failed to steal the spotlight from the dollar yesterday despite releasing a very promising economic report. The franc steamrollered the euro with a 96-pip win, but was no match for the Greenback as USD/CHF rose by 35 pips after dropping to .9926.

The UBS consumption indicator released yesterday revealed an increase to 1.72 after a sharp decline to 1.70 in September. Progress in the country’s retail sector and car registrations factored in the improvement, but weak consumer sentiment weighed on the data.

We’ll see if the survey on purchasing managers can give us a clear direction of the economy when SVME PMI report is released today at 8:30 am GMT. The data is expected to improve to 59.5 in November, but a higher number could attract more franc bulls.

Also keep your eyes peeled for any game-changers in risk sentiment! This might affect the demand for the low-yielding franc.

Stay alert, kiddos!

373

The franc gave up some of the pip love to the higher-yielding currencies yesterday when risk appetite came back with a vengeance. Though USD/CHF closed only 3 pips lower, EUR/CHF rebounded to an intraday high of 1.3192 before it ended the day 150 pips higher.

Maybe Switzerland’s better-than-expected SVME PMI also factored into the risk appetite mix when it printed at 61.8 in November. This is better than October’s 59.2 number, and the expected 60.6 figure.

Today is another big day for Switzerland as it releases its GDP figures for the third quarter at 6:45 am GMT. Analysts expect the data to cool down to a 0.5% growth after clocking in at 0.9% in the second quarter, but watch out for any shockers!

The annualized retail sales figure for October will also rear its head in the markets today. See if it exceeds September’s 4.1% growth when the report is released at 8:15 am GMT.

Be careful in your trades, kiddos!

374

Whee! The Swissy must’ve felt that Christmas came early this year as it reeled in a bunch of profits against the Greenback. Thanks to risk appetite and better than expected Swiss GDP, USD/CHF slid back below the 1.0000 handle and reached a low of 0.9889.

Swiss GDP beat expectations and printed 0.7% growth for the third quarter of 2010. Even though the second quarter figure was downwardly revised from 0.9% to 0.8%, the Swissy rejoiced when the actual third quarter reading surpassed the 0.5% consensus. Components of the third quarter GDP showed that the expansion was spurred by a 0.3% rise in consumption, a 0.6% increase in investment, and a 0.4% uptick in domestic demand.

However, the Swiss retail sales report for the first month of the last quarter of the year turned out to be a disappointment. Instead of printing a 4.9% year-on-year rise as expected, the actual figure came short and posted a mere 3.5% increase. This was also much less than the 4.1% retail sales growth seen in September. Could this mean that the Swiss economy will be in for a huge letdown once the fourth quarter GDP is released? We’ll just have to wait and see!

For now, it looks like the Swissy was unfazed by this weak retail sales report as it rallied after Spanish bond auctions turned out better than anticipated. This shows that debt contagion fears in the euro zone are starting to ease, which restored confidence in European currencies.

Whether this price behavior could continue today remains to be seen as the U.S. gets ready to release its employment report for November. The NFP is notorious for causing wild swings in the markets so better stay on your toes! Let’s see if USD/CHF can keep its head below the 1.0000 handle…

375

Talk about a strong rally! The Swiss franc made a run for it last Friday, pushing USD/CHF down by almost 200 pips after the NFP report. It looks like traders were really disappointed with the U.S. economy as they dumped their dollars for francs!

Switzerland’s better than expected CPI, along with the weak U.S. employment report, carried USD/CHF to new lows last Friday. Swiss inflation climbed by 0.2% in November, better than the expected 0.1% uptick. However, this was still weaker than the 0.5% increase in price levels seen last October and wasn’t enough to budge the 0.2% annual inflation figure.

For this week, Switzerland’s economic calendar is almost empty, if not for their unemployment figure release. The report is expected to show that the jobless rate is still steady at 3.6% for November. Find out whether the actual figure will be a huge letdown like the U.S. unemployment rate when the report is released on Tuesday 6:45 am GMT.

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Drats! The franc tumbled against its major counterparts yesterday despite the lack of economic reports from Switzerland. USD/CHF soared to its .9875 intraday high before ending the day 72 pips higher at .9820.

The franc will have a chance at playing by the fundamentals today at 6:45 pm GMT when Switzerland’s unemployment rate is released. Though Pipstradamus-wannabes are pegging the number at October’s 3.6% figure, an upside surprise could attract more franc bulls.

Don’t let me catch you snoozin’ on this one!

377

The Swissy showed that it ain’t ready to hang with the big boys as it slipped against the euro and the dollar yesterday. EUR/CHF climbed 33 pips to finish at 1.3107 while USD/CHF rose 55 pips and closed at .9875.

The Swiss unemployment rate, the only economic data published yesterday, failed to provide much support for the Swissy as it just matched expectations.

As forecasted, the unemployment rate rose from 3.5% to 3.6% in November. Estimates say a total of 2,303 were added to the unemployment pool last month. Disappointing as these numbers seem, even with these results Switzerland is still doing a lot better compared to last year as unemployment is down 13.6% year-on-year.

Nothing more to see from Switzerland today! But keep your eyes peeled for any developments in the U.S. and the euro zone since the Swissy tends to gain when those economies show signs of weakness!

378

Swissy traders were treated to a real snoozer yesterday as the currency stayed within a tight 50-pip range against the dollar. With no heavy economic releases, USD/CHF ended the day as if nothing happened and finished practically unchanged at .9866.

Since neither Switzerland nor the U.S. published any substantial reports yesterday, USD/CHF simply refused to budge.

Sadly, it looks like we’ll have more of the same today! So for those of you looking to trade the Swissy, it would probably be best to look elsewhere for possible market movers. We’ve seen how risk sentiment can change on a dime, and we all know how the Swissy tends to gain in times of risk aversion… So you ought to put on your sentiment hats, kiddos!

379

Fist bump to the franc for shooting two birds with one stone! Despite the absence of economic reports from Switzerland, the franc capped the day higher against the euro and the Greenback. USD/CHF closed 31 pips lower after hitting an intraday high of .9896. Meanwhile, EUR/CHF dropped to an intraday low before leveling off to a 61-pip rise.

It looks like the franc is in for another supporting role today as no economic report is scheduled in Switzerland. Keep close tabs on reports from the other regions though, as risk sentiment usually affects the franc’s price action. I hear that China, Canada, and the U.S. are set to release high-hitting data today!

Stay sharp in your trades, folks!

380

Three in a row, baby! For the third straight day, the Swissy made the dollar say “Uncle!” as uncertainty over the outlook for the U.S. economy kept traders from selling off their Swiss francs for dollars. When the New York session came to an end, USD/CHF had fallen 32 pips for the day.

We don’t really have much to talk about on the Swissy side of USD/CHF since Switzerland didn’t publish any economic data last Friday. But this week seems a lot more promising.

At 8:15 am GMT today, Switzerland is supposed to unveil last month’s PPIresults. As you know, Switzerland has been struggling with threats of deflation. And after last month’s sharp 0.4% drop in producer and import prices, an upside surprise would be more than welcome. This time around, analysts say a 0.1% rise is likely.

Tomorrow, the SECO economic forecasts report is due. Keep an eye on this one when it comes out at 6:45 am GMT because it predicts key economic factors such as consumption, employment and inflation. I’m sure you don’t want to miss out on all the insight this report can provide on the current and future state of the Swiss economy.

Then at 10:00 am GMT on Wednesday, the monthly ZEW survey will come out. We’ve seen three straight month-to-month declines in economic expectations over the past four months. So it would be a breath of fresh air if this report could break the bad run and print a rise from last month’s reading of -30.9.

You’d best be prepared when Switzerland whips out the big guns on Thursday. First, at 8:15 am GMT, the quarterly industrial production report will be available. Production growth is expected to have softened from 5.7% to 0.5% in Q3.

After that, the SNB takes center stage with its interest rate decision, monetary policy assessment, and press conference. Now, although we probably won’t see any changes made to the 0.25% libor rate, you would be a fool to miss the monetary policy assessment and press conference at 8:30 am GMT!

The assessment only takes place quarterly and the press conference only twice a year. As such, we could be provided rare insight from the central bank itself regarding economic affairs and future monetary policy. You don’t want to miss out on this potentially explosive event, now do you?

381

Ding ding ding! We have a winner! Though Swiss economic data was negative yesterday, USD/CHF showed the dollar who’s boss as it drove USD/CHF 146 pips lower to close at .9678.

The Swissy was able to overcome its disappointing PPI figures because of extreme dollar weakness. According to last month’s PPI, producer and import prices fell 0.2% month-on-month, which is waaay below the 0.1% uptick that most had expected to see. It seems like Switzerland hasn’t shaken off deflationary threats yet!

We get a better look at the state of the Swiss economy today when the SECO economic forecasts hit airwaves at 6:45 am GMT. Like I said yesterday, this report is important because it actually predicts economic factors such as employment, inflation, and GDP components. As such, it may provide valuable insight for all you Swissy traders!

382

Despite strong economic data from the U.S., the Swiss franc was able to outwit, outplay, and outlast the U.S. dollar in yesterday’s trading. USD/CHF fell from the .9700 area and hit a low of .9598 before closing at .9613.

The Swissy was able to draw strength from the SECO economic forecasts report which revealed that the Swiss government made an upward revision to their growth forecasts for next year. They predicted that their economy would grow by 1.5% in 2011 and 1.9% in 2012. Of course, these upbeat figures provided a boost for the Swissy.

For today, Switzerland is set to release its ZEW economic expectations at 10:00 am GMT. The index slid to the negative territory last November but it could bounce back this month as economic data started to improve again.

383

Consolidation was the name of the game for USD/CHF yesterday as the Swissy struggled to hold on to its recent gains amidst risk aversion’s comeback. However, the Greenback fought harder, pushing USD/CHF to close higher at .9682.

Switzerland’s ZEW economic expectations figure posted an improvement from -30.9 to -12.5 this month. Although the economic outlook brightened, the negative ZEW figure means that investors and analysts are still pessimistic about the Swiss economy.

Today is an important day for the Swissy because the SNB is set to release its monetary policy assessment at 8:30 am GMT. Policymakers are likely to keep rates on hold at 0.25% but the Swissy could be in for some exciting moves during the SNB press conference. Of course hawkish comments could be bullish for the franc while dovish words from central bank officials could be bearish for the franc. Keep your eyes and ears peeled then!

384

The Swissy was unusually perky yesterday as it was hyped up by a positive industrial production report and the SNB’s press conference. At the end of the day, USD/CHF 37 pips lower at .9646 while EUR/CHF dropped 32 pips and finished just 2 pips above its all-time low at 1.2768.

Switzerland got a bit of good news when its industrial production figures for Q3 came out. Most were expecting to see a much weaker growth of 0.9% after Q2 had posted a solid 5.8% rise. That being said, investors were quite surprised to see a decent 1.8% quarter-on-quarter increase and they showed their appreciation by giving the Swissy a lift.

After that, it was all about the SNB. The central bank shook things up yesterday as it made its interest rate decision and let slip a few comments on the state of the economy. As expected, it kept rates steady at 0.25%. But what most were more interested in hearing was what it had to say about the economy.

According to the SNB, it is willing to act to achieve price stability. As you know, Switzerland has been battling deflationary threats, and one of the ways it has combated deflation in the past is by intervention. Though market interventions weren’t directly mentioned yesterday, it does make us wonder how long the central bank will allow the Swissy to continue to rise.

The franc’s appreciation has been taking its toll on Swiss exports, and in such a time of economic uncertainty, Switzerland can’t afford to take such a hit. Already, the SNB expects growth to slow in the coming quarters.

Phew! That’s a lot of food for thought. And it looks like you’ll have more time to chew on that today since we won’t have any new Swiss data to work with. In the meantime, be sure to monitor risk sentiment! The Swissy might just extend its gains further if risk sentiment turns sour!

385

The range on EUR/CHF during Friday’s trading was as tight as Katie Perry’s jeans. It opened at 1.2768 and fell to a new all-time low at 1.2720 before closing just 3 pips from its intraday high at 1.2792. The Swissy also lost to the dollar, erasing the win it posted on Thursday, as USD/CHF closed 58 pips higher at .9702.

Without any economic report on tap, the currency was left vulnerable to market sentiment. Risk aversion sparked by Ireland’s credit downgrade might have allowed the Swissy to tap a new high against the euro, but it also might have caused it its loss against the dollar.

Aha! And it looks like things won’t be much different for the Swissy this week given that we only have Switzerland’s trade balance report for November on tap. Tomorrow at 7:15 am GMT, the market is expecting to see that exports outpaced imports by 1.88 billion CHF.

A better-than-expected figure will most probably be bullish for the currency. However, take note that the SNB isn’t a big fan of a strong Swissy. With EUR/CHF chillin’ at its all-time lows, it might be wise to keep in mind that the central bank could return to its old habit of intervening in the currency market.

So y’all be careful, ayt?

386

Aha! It looks like Santa came early for the Swissy this year. It tapped a new all-time high against the euro at 1.2635 before finally ending the day with a 101-pip gain at 1.2666. It was also able to pare the loss it scored against the dollar on Friday when USD/CHF ended yesterday’s trading 47 pips lower at .9649.

Without any debt crisis or fiscal problems to weigh it down unlike the euro and the dollar, it isn’t hard to imagine the Swissy having a pip-filled Christmas. Hmmm, I wonder if today’s trading will be as merry as yesterday for the currency.

If Switzerland’s trade balance report for November shows that exports outpaced imports by more than 1.98 billion CHF, it just may be! So keep tabs on that later at 7:15 am GMT.