European fundamentals have significantly deteriorated over the past four months while the Swiss outlook for the remainder of the year continues to be a wild card. May retail sales in Switzerland posted a 7.4 percent increase, coming off a 9.4 percent decline the month prior. The trend in the near-term may remain relatively even given that the unemployment rate has kept steady at 2.5 percent since March. However, it seems only a matter of time before malaise from the EU spreads: Switzerland counts on the regional bloc to absorb 60% of its exports.
Trading Tip – Quarterly Euro-Zone GDP and CPI figures are expected to post negative readings for the first time in the Zone’s history. As such, Thursday may be a volatile day for Euro trading given the anticipated nature of these releases. As a caution, traders may want to wait for the release of these numbers before setting their entry orders. 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 1.6297 prior to our order being filled.
Event Risk for Europe and Switzerland
Europe – Thursday will see the release of highly anticipated European news including both the German and Euro-Zone GDP and CPI releases. Both German and Euro-Zone GDP metrics are expected to post negative readings with the latter having never printed negatively since the Euro’s founding. Meanwhile, Euro-Zone inflation will also be negative for the first time since the Zone’s founding, according to analyst forecasts of a 0.2 percent decline. The stark contrast from the preceding periods comes on the back of July’s oil decline of nearly 20 percent. The same day also sees the release of the French GDP metric for July, a metric likely to add to bearish sentiment. All this will weigh heavily on the ECB as the market increasingly expects near-term rate cuts.
Switzerland – The week presents only one news release of significance for Switzerland. Thursday’s SECO Consumer Climate, which measures whether 1,100 families feel their economic conditions will improve over the next 12 months, is expected to decline to -4 from 2. The metric has been on steady decline since the beginning on the year when it was at 14.
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