EURCHF Ranging Ahead of a Busy European Calendar

Recent price action has seen EURCHF remain range-bound as both the ECB and SNB remain on hold, leaving traders expecting yield gap neutrality in the near term.

[B]Trading Tip[/B] – Consumer price data this week will take precedence as the ECB will use this measure to either solidify or modify position on interest rate neutrality. ZEW survey figures will also be watched as further downside printings will leave the ECB in a tighter position where it may need to cut rates. In addition to a stop loss, we will look to control risk further by removing any unfilled orders by the end of the week of should spot close above 1.6225 prior to our order being filled.

[B]Event Risk for Europe and Switzerland[/B]

[B]Europe[/B] – To start, the release of May’s French Current Account Balance will likely post a deteriorating figure as the historically strong Euro has eroded the export sector of many EZ countries. That said, traders will likely focus their attention elsewhere: The European balancing act of managing growth along with taming inflation will be put to the ultimate test as CPI data for Italy, France, Germany and the overall Euro Zone will be released along with the ZEW series of sentiment surveys. Weak CPI data will put dramatic selling pressure on the Euro as this would further solidify the ECB’s neutral stance through the year’s end. The ZEW release will likely show further deterioration in the EZ’s largest economy as the spillover from the US becomes clearer with the passage of time. Current ZEW bias is to the downside, allowing only strong upside deviations to dramatically alter the EURCHF trajectory. To end the week, May’s EZ Trade Balance is expected to deteriorate for similar reasons to that of the aforementioned French Current Account metric. Ultimately, all eyes will be on the EZ and German inflation releases with the ZEW surveys taking a close second place.

[B]Switzerland[/B] – The light Swiss docket this week leaves only one data release to sway EURCHF. The Adjusted Real Retail Sales figure for May is unlikely to deviate from the original estimate thus producing little volatility on the Swiss side.

[I]To contact Ilya with comments regarding this or other articles he has authored, please email him at <[email protected]>[/I]