Article by AlgosysFx Forex Trading Solutions
The USD/CHF is foreseen to head north as buoyant US economic data and a speech by Swiss National Bank Chairman Thomas Jordan are seen to shore up demand for the US dollar. A report yesterday from the US revealed that consumer confidence is on the rise while Jordan reiterated that the SNB’s Franc cap is the appropriate policy for the foreseeable future.
Coming off a positive jobs report which saw the Unemployment Rate drop to 7.8 percent, its lowest level since January 2009, the IBD/TIPP Economic Optimism index rose to a 71-month high in October. The index increased from 51.8 points to 54.0 points this month, exceeding forecasts of a modest rise to 52.3 points. The figure is also 13 percent above its 12-month average of 47.6 points. Despite high gasoline prices, recent strides in the labor market and higher stock prices likely buoyed confidence among Americans. Household purchases account for approximately 70 percent of economic activity, and improved sentiment likely suggests that the US economy could recover in the second half of the year after expanding by only 1.3 percent in the June quarter. Also awaited today is the release of the Federal Reserve’s Beige Book, which details economic conditions among the different Fed districts across the nation. Should the report reflect the steady improvement especially in the jobs and manufacturing sector last month, the markets could take this as a sign that the Fed’s quantitative easing could be terminated sooner that initially planned. Considering these, expect a firmer Greenback today.
Meanwhile, the Swissie is perceived to be weighed by comments from SNB Chairman Thomas Jordan as he spoke at the Swiss Chamber of Commerce and Industry in Tokyo today. Jordan said that with challenging times still lie ahead for Europe and the rest of the world. He forecasts growth to be at a bleak 1 percent this year as Swiss exports continue to face a difficult situation with the Franc remaining highly valued. Hence, he says that the Franc cap at 1.20 per Euro remains appropriate for the time being.
Likewise, European debt concerns are deemed to continue apply downward pressure on the Swissie. A meeting by German Chancellor Angela Merkel and Greek Prime Minister Antonis Samaras seemingly failed to reassure investors that an agreement is imminent on Greece’s next aid tranche. While proclaiming her desire to keep Greece in the Euro Zone, Merkel maintained pressure on the government to fulfill its austerity pledges, saying that much remains to be done. The Greek government has been negotiating with the so-called troika of lenders for more than two months over a program of spending cuts, which is key to triggering the next 31 Billion Euros in aid. Uncertainty over a possible bailout for Spain is also hurting sentiment after Spanish economy minister Luis de Guindos said yesterday that the nation is looking at the wider implications of a bailout request, again failing to provide a clear response on whether an official request is imminent. Considering these, a long position is recommended for the USD/CHF today.
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