After making substantial gains against the dollar in the wake of the FOMCs dovish commentary on June 29th, the Swissie was stumbling through most of last week until a strong employment figure reversed the units fortunes. All in all, the pair was able to fight its way back to par with Mondays open. Next week holds only one possible market influential report, and the USDCHF should thus trade primarily off of cross currency economic reports and a general shift in risk aversion due to heightened geopolitical tensions. The Producer & Import Price indicator for June is the only piece of data within the span of the coming week.
Though there is no solid release data associated with this indicator, as is common, it is currently set at the earliest for the 14th. However, revisions to earlier releases dates are common. Predictions for the inflationary gauge are for reported contraction in June, but with oil relatively stable other commodities beginning to show signs of a second wind, the number could easily find its way back into positive territory. With both growth and inflation gauges over the past months reporting promising figures, the producer and import price figure should just be another addition to the heavy speculation of another 25 basis point hike from the SNB come September. However, with the rate disparity between the Swiss unit and the US counterpart still strongly in the latters favor, the dynamics should continue to weigh on the currency. Currently, the policy rate is 1.50% - compared with 5.25% in the US. The strongest appreciation will occur in the USDCHF pair if the Fed finally puts a cap on its rate hikes and, at the same time, the SNB begins to signal a more aggressive half-point hike due for the third quarter meeting. Until this evolves however, next week will continue to feel the influences of the standoff on nuclear rights between the United Nations and Iran, as well as the recent aggression evinced by North Korea. In all this uncertainty, it has held historically held true the safe confines of neutral Swiss banks is the best place to park ones capital.
Data released last week added fuel to expectations of a booming Swiss economy, as the SVME-Purchasing Managers Index for June carried on its strong pace and the jobless rate notched lower once again. At 64.0, the PMI indicator was near the all-time high set earlier this year in March. The number had retreated from the 65.2 reading for two straight months, but reversed course in June as demand from big trade partners helped to send another jolt of orders into the mix. Meanwhile, unemployment continued to decline from the 3.9% mark in January, hitting 3.1% this past month. This was a sizable step down from 3.3% the month prior, and seasonally adjusted the measure followed pace dropping to 3.3%, from 3.4% in May. This strong pace of hiring has put the Swiss economy in a good position to sustain itself through domestic demand, once the circulation of higher wages and employment can fully take effect in the economy.
