Daily Economic Commentary: Switzerland

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.

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 leveldata 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?

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?

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.

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.

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?

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.

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.

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.

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.

The USDCHF leapt after making contact with the 1.0550 level yesterday as US economic reports caused a short-term run of risk aversion. Up ahead, Switzerland is set to report its CPI for August. Aside from that, today’s US NFP report could cause some chaotic price action for the pair.

Investors scampered back to the safe arms of the USD as weekly unemployment claims and ISM non-manufacturing PMI weren’t so upbeat. This caused the CHF to reverse its rally and give back its gains to the USD towards the end of the day. For today, traders gear up for bigger price moves as the NFP report promises to bring more volatility to the table…

But before that, Switzerland is expected to post a 0.3% increase in price levels for August after sliding down by 0.7% in July. The actual figure is due at 7:15 am GMT.

The Swissy managed to cover all of its losses against the USD and even close positively last Friday. Initially, there was a sharp sell-off of the CHF following the release of the NFP report. It, however, made a quick V-turn 2 to 3 hours later.

Switzerland�s month-over-month CPI in August rose by 0.1% after declining by 0.7% in the previous period. Switzerland is still in a deflationary environment given a -0.8% annual rate. Nonetheless, the improvement in the monthly and annual figures gave some support to the CHF.

Switzerland will have a very light calendar this week. Only its unemployment rate is scheduled for release tomorrow (September 8). Switzerland�s jobless rate is projected to increase to 4.1% from 3.9%. Any increase the figure could reflect negatively on the CHF.

Will we see another range bound day for the Swissy today or will we see a breakout as money starts flowing back into the capital markets after the long weekend?

Switzerland�s unemployment rate will be released early morning at 5:45 am GMT. The forecast is that the jobless rate for August jumped to 4.1% from 3.9% the month prior. Even though a lagging indicator, traders tend to pay attention to unemployment figures as the number of people with (or without) jobs has a tight correlation with the purchasing power of consumers. More people with jobs mean more money in the pockets of consumers which leads to increased spending.

Go Swissy! Go Swissy! Go! The CHF set a new yearly high yesterday, riding on USD weakness. The USDCHF pair closed trading yesterday at 1.0462, dropping 130 pips from its opening price!

The CHF was able to overcome a report that showed that Swiss unemployment rose to 4.0% in August. I don’t think the markets paid much attention to this report. Instead, the markets probably focused on good data that was released from other European countries, as well as the UN report calling for a new global currency.

I suspect the franc could have also benefited after the World Economic Forum named Switzerland as having the most competitive economy. Switzerland bumped off the US from the number 1 spot, as the US lost out on the threat of rising budget deficits. Switzerland on the other hand, was applauded for its ability to innovate and its stability.

This makes me wonder - if the US is still struggling, could this spark concerns about recovery? Will this lead to another run of risk aversion? If it does, will the USD stand to gain? Or will all of the concerns regarding the USD cause investors and traders to look elsewhere? Could the CHF, a former save haven currency, stand to benefit? Hmmm. Let’s see about that…

Dollar weakness was still the main theme yesterday, pulling the USDCHF down to the 1.0400 level. The pair underwent a bit of consolidation at the 1.0450 area before continuing its slide to a low of 1.0384 - a new high for the Swissy!

No economic reports were released from Switzerland yesterday, leaving the US Fed’s Beige Book report as the only economic event affecting the pair’s price action. The report highlighted consumer spending as the US economy’s weak point, causing some investors to run back to the safe-haven USD. However, the USD resumed its downtrend later on…

Switzerland’s economic calendar is empty until the end of the week, which means that the USDCHF’s movement would be driven mainly by US economic reports. Today we have the US trade balance and weekly jobless claims on the docket. If these reports fail to meet expectations, then a short-term wave of risk aversion could be seen. Otherwise, expect the USD to seal its place in the bear market…

Even without having any economic catalyst in Switzerland, the CHF still managed to edge the USD in yesterday�s trading. The USD/CHF pierced through the 1.0400 psychological support and is now trading below it. However, the USD may bounce back later in commemoration of the 9/11 terrorist attacks in the US.

No economic reports were due in the US yesterday. The CHF gained as risk appetite resurfaced in the US. Treasury Secretary Geithner�s testimony that the Congress may now remove its budget provision for further financial support on banks lifted the capitals markets as well as the �anti-dollars.�

Today will be idle as well in Switzerland in terms of economic reports. The CHF, however, may benefit if the US market falls as it commemorates the 9/11 attacks.

The CHF had a stellar performance last week as risk appetite surged back into the markets in full force. The show was pretty convincing as the USDCHF made a new yearly low at 1.0340.

Switzerland�s economic calendar tends to be relatively quiet compared to other major economies but this week will be different. On tap today is the producer price index for the month of September. The consensus is a 0.1% rise in the average price of goods and raw materials bought by manufacturers. On Wednesday, there�s the August report on sales. Sales probably rose 1.1% from 0.9% the month prior. Lastly and most importantly, the Swiss National Bank will be releasing its monthly assessment on their monetary policy on Thursday.

And the CHF continues to dominate! Yesterday marked the 7th consecutive day that the franc gained versus the dollar! When will this amazing run stop?

The producer price index was released yesterday, and as expected, it printed a 0.1% rise in the prices of goods and raw materials bought by manufacturers. This could be seen as a good sign, given that other parts of Europe are experiencing falling prices, which may lead to a deflation.

Later today at 7:15 am GMT, quarterly industrial production data is expected to show that production rose by 7.8% in the past quarter. I don’t think that this will have much effect on the markets as it could already be priced in, but if it does show better than expected results, we may see a further boost in the CHF.

The USDCHF ended the day unchanged as the Greenback took a sharp U-turn in its rally against the Swissy. As strong economic data poured in from the US, risk appetite dominated in the currency markets, causing the USDCHF to sink below 1.0350.

The Swissy initially gave way to the Greenback as Switzerland’s industrial production reading came in way below expectations. Gunning for the expected 7.8% increase, industrial production came short as it posted a mere 2.7% uptick. This is hardly a rebound from the previous month’s 13.1% slump in industrial production, indicating that the Swiss economy isn’t out of the rut just yet. Based on this report, some speculate that the SNB would announce additional monetary easing measures on its monetary policy statement on Thursday.

Still, the Swissy recovered its losses as risk tolerance caused a USD sell-off towards the end of the day. Empire State manufacturing index, retail sales, and PPI all posted improvements, providing basis for US Fed Chairman Ben Bernanke’s statement that the US could emerge from the recession by the third quarter.

For today, Swiss retail sales are on schedule. After posting a 0.9% year-on-year increase in June, a 1.0% rise is expected for July. Also due today are ZEW economic expectations. The previous reading stood at 18.6 and any improvement in the current reading could allow the Swissy to take on more gains.

Watch out for the US economic data coming in today. CPI, current account balance, TIC long-term purchases, capacity utilization rate, and industrial production are all due later on. Whew! Would the USDCHF slide down on account of risk tolerance for another day?

The CHF continued its up-move and extended its daily winning streak vis-�-vis the greenback yesterday to nine. The only hurdle in its course is the 1.0300 handle. Will a persisting selling pressure due to risk appetite cause the USDCHF to move down even further? Or will this streak be broken by a potential market intervention by the SNB?

Switzerland�s annualized retail sales in July came in line with expectations at 1.0%, which is a tad higher than the 0.9% growth in the month prior. On a separate report, the Zew economic expectations for September leaped to 58.0 from 18.6. Such jump in the number indicates an increasing optimism in the Swiss market. These accounts, however, were not the ones that moved the Swissy in yesterday�s trading. It was still the overall risk appetite in the global terrain, particularly in the US, that lifted �riskier� but �higher� yielding assets like the CHF.

Today will be a huge day in Switzerland with the Libor rate decision of the Swiss National Bank at 12:00 pm GMT. The bank is expected to leave its interest rate unchanged at 0.25%. Though, the market is widely aware of a possible bank intervention given the CHF�s strength.

To read more about the upcoming Libor rate decision, you may check out my previous blog� Who Moved My Swissy?.