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Idea of the Day

The Swissie and in particular EURCHF has been a good indicator of the sentiment towards the single currency. During the sovereign crisis last year, the SNB were intervening heavily to ensure that the cross did not move below the 1.20 floor that the SNB imposed in September 2011.

Now, the pressure is in the opposite direction, EURCHF having moved to a 5 week high this week and having moved higher every day of this week.   We talked earlier in the week about how the euro was trading more like a dollar alternative and this is another manifestation of this (given it’s the next most liquid currency after the dollar).

And with the market not yet convinced that the Fed is going to start tapering in September, there could be more of this to come for EURCHF, making the 1.25 level a possibility once again (seen briefly back in May).

EUR: Final inflation data should show the headline rate steady at 1.6%, which would be the sixth consecutive month inflation falls below the ECB’s 2% threshold.

USD: Michigan confidence data does have a habit of upsetting things on a quite Friday afternoon if way out of line vs. expectations. The market expects a modest rise to 85.3 (from 85.1), but stronger data could push the dollar higher into the weekend.

See how to trade the US consumer sentiment with USD/JPY

JPN: Note that trade data is released on Monday and the focus will be on signs that the weaker yen of the past 8 months is starting to feed through into better trade numbers (small deficit, or possibly surplus). Short-term trends suggest this is slowly happening.   Move into surplus would give the yen some further modest support.

Latest FX News

JPY:  Trading softer for most of the week. Talk has been of potential corporate tax, as corporates are currently cash rich, which would be seen as offering some offset to the consumption tax increase schedule for next year. This has weighed on the yen.

CHF: Breaking out of its recent slumber, with move above 1.24 on EURCHF.   Better data from the Eurozone economy is certainly supportive, as well as the absence of tensions on the Eurozone sovereign front, at least compared to last summer.

GBP: Sterling pushed to a 2 month high yesterday on the back of the latest better than expected data release in the form of UK retail sales. Sterling bears have been run over once again, almost as much as yen bears, as cable pushes levels last seen mid-June.