SNB & CHF

As noted earlier this week, the world’s two big hopes for the global economy in the second half are pinned on the US labor market continuing to exert its purported strength and Chinese authorities stimulating out of every possible (monetary) opening. Incoming data, however, continues to point to the fallacies embedded within each. The US labor market is a foundation of non-inflationary sand, and China’s “stimulus” is...

Swiss Franc The Euro has fallen by 0.02% at 1.1201 EUR/CHF and USD/CHF, June 14(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com - Click to enlarge FX Rates Overview: Worries about an escalation in the Gulf following US accusations that Iran was behind yesterday’s two attacks and weaker growth impulses, while trade tensions remain high, are dampening risk appetites ahead of the weekend. Equities are...

Herds get spooked and run. That’s the crash scenario in a nutshell. We have all been trained by a decade of central bank saves to expect any stock market swoon will soon be reversed by central bank sweet talk and/or rate cuts. As a result of such ever-present central bank willingness to intervene in the stock market, participants have been trained to believe a stock market crash is no longer possible: should the market...

Political uncertainty & Brexit cause sterling weakness The pound’s value is being predominantly dictated by Brexit. Over the past month sterling has gradually declined in value against the Swiss franc. There is potential for further falls for the pound due to the lack of clarity surrounding Brexit and the leadership battle for the new Conservative leader. There are candidates for the role of Prime Minister who have...

Our central forecast is for Bund yields to rise (feebly) into positive territory by the end of this year, although risks are tilting to the downside. Four main factors have been driving down the 10-year Bund yield, which reached an all-time low of -0.26% on June 7. Considering changing circumstances, we have lowered our year-end target for the 10-year Bund yield from 0.3% to 0.1% and expect it to remain in negative...

Swiss Franc The Euro has fallen by 0.32% at 1.1199 EUR/CHF and USD/CHF, June 13(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com - Click to enlarge FX Rates Overview: After roiling the markets by threatening escalating tariffs on Mexico, US President Trump has threatened China that if Xi does not meet him and return to the positions that the US claims it had previously, he will through on imposing...

SECO warned that the flagging global economy was slowing Swiss trade abroad: The State Secretariat for Economic Affairs (SECO) is expecting the Swiss economy to grow by +1.2% in 2019, it said on Thursday. It revised its economic forecast upwards slightly from +1.1% in March, following 0.6% growth in the first quarter thanks to vigorous domestic demand. In a statement on Thursdayexternal link, SECO warned that the...

Swiss National Bank leaves expansionary monetary policy unchanged and introduces SNB policy rate The Swiss National Bank is maintaining its expansionary monetary policy, thereby stabilising price developments and supporting economic activity. Interest on sight deposits at the SNB is unchanged at –0.75%. The SNB will remain active in the foreign exchange market as necessary, while taking the overall currency situation...

The Producer Price Index (PPI) or officially named “Producer and Import Price Index” describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015...

Commodity prices continued to fall last month. According to the World Bank’s Pink Sheet catalog, non-energy commodity prices accelerated to the downside. Falling 9.4% on average in May 2019 when compared to average prices in May 2018, it was the largest decline since the depths of Euro$ #3 in February 2016. Base metal prices (excluding iron) also continue to register sharp reductions. Down 16% on average last month,...