Daily Economic Commentary: Switzerland

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

The USD/CHF is still lounging above the 1.0600 area as traders are unsure of which direction to take ahead of today’s US NFP report. The pair inched a bit higher yesterday as Swiss consumer confidence showed signs of weakness.

The SECO consumer confidence index highlighted the deterioration of Swiss consumer confidence when it slid from -38 to -42 as expected. The components of the index indicate that the assessment of Switzerland’s economic condition worsened from -96 to -100. The estimate of households’ financial situation eased while the development of the household budget for the next twelve months was less favorably evaluated.

Up ahead, Swiss unemployment rate is due at 5:45 am GMT today. Conditions in the nation’s labor market are expected to weaken as the jobless rate is projected to climb from 3.8% to 3.9%. Although this report is expected to have a minimal impact, a deteriorating labor market exposes the CHF to greater potential losses against the USD. The US is also set to update its labor market situation today, with the NFP report on tap.

Like the other majors, the CHF got bullied the same in Friday�s class. Last Friday�s price action was like a candy being stolen away from the CHF by the much bigger USD. Not only did it bow before the USD but also to the other majors except the JPY.

Switzerland�s unemployment rate in July rose slightly to 3.9% from 3.8%. The CHF lost a little bit of support following the release but it managed to stay within a tight range ahead of the upcoming big event in the US � the release of the NFP report.

The NFP report lit some pyro display during the US session as it came out significantly better than the initial estimates. The CHF surged at first due to the increase in risk appetite. However, fundamentals finally came through over sentiment as the USD gained favor despite some positive economic results in the US.

Switzerland will be quiet today in terms of economic releases. The CHF may just trade in a range bound fashion given the lack of economic flows.

No economic data was released yesterday yet traders took the CHF southwards again for the second trading day in a row. It seems that fundamentals are starting to catch up to these low-yielding �risky� currencies as they continue to lose ground against the USD.

With today�s empty economic calendar, it�s hard to say whether this type of price action would persist. The next economic data set for release would be the Swiss producer price index on Thursday. It is predicted to show a 0.1% rise.

Quiet day from the Swiss franc, as no economic reports were released. Still, the CHF gained slightly against the USD as the dollar experienced some weakness against European currencies.

On Thursday, we have the Producer Price Index report scheduled for release at 7:15 am GMT. Forecasts are for a 0.1% increase in producer prices.

Be on the lookout for reports coming out from the US (more specifically, the FOMC statement), as it may cause a shift in risk sentiment.

For the most part, the USD/CHF slid down in a slow but steady pace yesterday. After hitting the 1.0850 mark, the pair tumbled to a low of 1.0773. It then jolted to a rally-then-reverse mode towards the end of the day.

Much of the price action in the USD/CHF pair was caused by US economic reports since Switzerland’s economic calendar was bare yesterday. The USD sold off as US trade balance figures came in better than expected. The chaotic price action after 6:15 pm GMT is an aftermath of the FOMC statement. As the Fed highlighted the economic advancements in the US, the USD was torn between two masters: fundamentals and risk sentiment. In the end, when the dust settled, the USD/CHF landed back to where it was prior to the FOMC statement.

For today, the US is gearing up to unload another set of market-moving economic data, namely their retail sales and weekly jobless claims. Meanwhile, Switzerland has its PPI on the docket. Producer prices are expected to step up by 0.1% in July, after holding steady in June. The actual figure is due at 7:15 am GMT.

The CHF ran past the USD in yesterday�s trading. The better-than-expected German and euro zone�s GDP result coupled with the dismal set of economic updates in the US have helped propel the CHF above water.

Switzerland�s producer price index for the month of July was released yesterday. The index came in flat against expectations for a 0.1% rise. But even this dismal result was not enough to weaken the Swissy versus the USD. USD sell-off ensued throughout the euro session due to the surprise improvements in Germany�s and euro zone�s GDP.

The CHF gained some more ground versus the USD during the US session as the US retail sales and unemployment claims showed some dismal results.

No economic data from Switzerland today. The CHF may just look for leads from the CPI reports in the euro zone and the US regarding its movement today. Positive CPI results in the euro zone and dismal CPI in the US could both benefit the Swissy.

The CHF gave back a bit of ground to the USD as the trading week came to a close last Friday. Given Switzerland�s empty economic calendar, the move was primarily caused by the surge in risk aversion caused by the worse-than-expected data from the US.

Expect to see Switzerland�s report on retail sales for June today at 7:15 am GMT. The consensus is a 0.8% rise year-on-year. Since consumer spending makes up more than 70% of a country�s economic activity, it would be prudent to keep an eye out on the economic release.

The franc sold off against the dollar yesterday, primarily on USD strength across the board. It did gain however, against the euro, marking the 5th consecutive day that the EURCHF has dropped. If this continues, could we see more threats of currency intervention from the SNB?

Retail sales picked up in June, showing a 0.9% increase year on year. Still, analysts remain cautious as unemployment is still unstable. They fear that this will cause consumers to lessen their spending in the coming months.

Nothing due today or tomorrow, so be on the lookout for high impact news, especially those coming out from the UK and US.

The franc started the day by falling against the greenback… only to recover its losses by the end of the day. No economic reports were released from Switzerland yesterday but the USD/CHF tumbled down as traders snubbed the negative economic reports from the US.

US building permits, housing starts, and PPI figures all failed to meet the consensus, hinting that the US economy still suffers from underlying weaknesses. Instead of causing a wave of risk aversion, these reports were ignored as market players focused on positive earnings reports from big-scale US companies Target and Home Depot.

Risk appetite may have extended its stay in the market but is it leaving any time soon? No market-moving reports are due from both the US and Switzerland today so consolidation could be the theme for the day.

The USD/CHF was practically in a consolidation mode around the 1.0750 area for the most part of yesterday. The silence, however, was broken during the US session. The price suddenly pierced through the 1.0750 and 1.0700 supports in just two strong moves.

No reports were due in Switzerland and the US yesterday. The sell-off in the USD was caused by risk appetite due to the 4.7% jump in oil prices which buoyed the entire US stock market.

The ZEW economic expectations survey for the month of August is due today at 9:00 am GMT. The last reading was pegged flat at 0.

For today, most of the CHF�s price action would probably be dictated by the results of the US unemployment claims and Philly Fed index later. Any improvements could once again benefit the CHF.