Despite economic data that would normally warrant Swissie bullishness, the USD/CHF spent most of the week climbing towards the psychologically important 1.2600 figure. However, dovish rhetoric by the US Fed allowed the currency to redeem some of its strength on economic merit as the pair moved back down towards 1.2350. With significant positive data ahead, it may shape up to be a good week for Swissie bulls.
Should market participants decide to trade off of fundamentals this week, the Swiss franc stands to benefit as two of the countrys most important indicators are expected to improve. On Tuesday, the UBS Consumption Indicator is anticipated to rise even further from 1.865, the highest reading since April 2002, as household spending has been encouraged by low unemployment numbers and mounting consumer sentiment. Thursdays release of the even more significant KOF Leading Indicator should show similar improvements, as the reading is expected to climb to 2.55 in July from 2.50 on stellar business confidence. Growth throughout various sectors have underpinned the Swiss economic expansion, as acknowledged by the Swiss National Bank via two consecutive quarterly rate hikes in 2006. The probability of a 2% benchmark by the end of the year has increased dramatically due to a Swiss economy, which outpaces that of Europe consistently.
Economic data out of Switzerland started out the week on a sour note, as adjusted real retail sales fell from its April high of 12.2% to a negative reading of 2.3% on rising oil prices. However, the volatile sales figure is still considered to be trending upwards, boding well for the Swissie. While the trade balance did narrow and failed to meet expectations, the surplus was still firm at ?0.94 billion, down from Mays ?1.04 billion. Exports, which make up 47% of Swiss GDP, came in at a whopping rise of 13.2%, while imports only gained 2.9%. The value of imports, however, is what affected the trade balance as Producer and Import Prices unexpectedly accelerated at 3.1%, the fastest annual pace in over 16 years in June. This same inflation figure was positive for Swiss producers, though, allowing them to raise prices on their goods and subsequently improving profit margins. Although this past weeks data wasnt exemplary of a booming economy, the underlying factors of economic growth remain and are likely to be considered positive.
