The Swiss economic calendar offered up another week of mixed data, that is continuing to slowly whittle away speculators confidence that a September rate hike is a sure bet. Moving ahead to the coming days, another short, but solid board of data will throw its bid into the speculation pool.
Starting the week off quickly, July unemployment is expected to notch down in its unrefined calculation but hold steady when seasonally adjusted. If the unadjusted jobless rate falls to 3.0% as expected, it would be the lowest level since October of 2002. This would likely lead to further improvements in consumer confidence and spending, of which there has been little lack this year. With the June measurement of the UBSs consumption read posting at a five year high, the added aggregate wealth behind more jobs could further support economic growth that is sustainable through largely domestic means rather than the export markets prominence now. If the unemployment rate is unable to stir some Swissie momentum, then Thursdays SECO Consumer Climate indicator for the same month will provide a second opportunity. The only reliable and periodic gauge of consumer sentiment, the SECO is expected to surge to a 12 read, potentially the highest recorded figure since the second quarter of 2001. Over the past quarter, Swiss optimism was well supported with strong employment and wage growth that has been supported by firm revenue generated by a strong export market. Beyond the scheduled data and its influence on Septembers rate hike however, swissie traders will also be monitoring the developments in some of the worlds geo-political hotspots. As tensions between the UN and Iraq, and Israel and Hezbollah increase demand for capital security will follow. Historically, these safe havens for investors have been gold and the Swiss dollar.
This past week, the Swiss currency continued to press higher against its US counterpart despite a mixed bag of indicators from the nation itself. Starting off the week late, the first indicator for inclusion into fundamental valuations was the SVME PMI gauge for July. The survey of 200 Swiss executives reported a rise to 65.1, just shy of the recent record set in the gauge just a few months prior. Within the overall number, components gauges of production and employment provided strong support for the health of the Swiss economy. The employment figure, which precedes the following weeks official jobless read from the Secretariat, rose to 59.7. This marked the fastest hiring trend from manufacturers since October of 2000. Taking the credit for the improvement in payrolls was the increase in the production component from 65 to 71, the highest level on record. Foreign demand for Swiss-made goods continues to rise as the exchange rates continue to shift in the nations favor. At the same time, the more important growth in demand is coming from domestic sources as the recirculation of export revenues into the economy fuels a boom in consumer spending and business investment. While this indicator lent to a wave of swissie bids, the following days release acted just the opposite. Already expected to contract in July, the consumer price index fell below expectations by dropping 0.7%, the most in two years. This monthly change was enough to pull the longer year over year figure down to 1.4%. This was the second disappointing showing for Swiss inflation following the Producer/import price index slowing to its pace to remain unchanged just the month before. While expectations are still strongly supportive of two more rate hikes before the year is out, the easing inflation reads has posed a serious threat to those who were before without a shade of doubt in their convictions. Overall, for the week, the franc was able to push 125 points ahead against the US dollar to 1.2225.
