Little Action in Euro; Strong Gains in Swiss Franc

The Euro was unchanged against the US dollar today thanks to stronger than expected economic data. The German trade surplus increased from 15.0B to 17.5B. Both imports and exports were lower, but the larger drop in imports drove the overall trade surplus higher. Industrial production for the same month was right in line with expectations, but the April figures were revised higher. With only French and Italian industrial production due for release tomorrow, the Euro should move almost exclusively on the market?s reaction to US Fed Chairman Bernanke?s comments on inflation.

Meanwhile even though there was no Swiss data released overnight, the Franc has performed extraordinarily well. The interest rate curve is pricing in two and possibly even three quarter point hikes by the end of the year. The divergence between Swiss and Japanese interest rate expectations is the exact reason why CHF/JPY hit a new 16 year high today.