Forexpros — The Swiss franc surged to a record high against the U.S. dollar on Friday, as talks aimed at raising the U.S. debt ceiling remained deadlocked, while worse-that expected data on second quarter U.S. growth sparked fears that the economy could slide into another recession.
USD/CHF hit 0.8154 on Monday, the weekly high; the pair subsequently consolidated at 0.7853 by close of trade on Friday, plunging 3.24% over the week.
The pair is likely to find short-term support at 0.7800 and resistance at 0.8068, the high of July 26.
On Friday, the Commerce Department said that the U.S. economy grew at an annual rate of just 1.3% in the second quarter, falling short of expectations for growth of 1.7%. First quarter growth was revised sharply lower to 0.4%, down from 1.9%.
Meanwhile, with only days to go before an August 2 deadline to raise the U.S. debt ceiling, Congressional leaders and the White House had not reached a consensus that would avert a downgrade or default on the nation’s debt.
On Friday, U.S. President Barack Obama urged divided Republicans and Democrats to reach an agreement.
The Swissie was also boosted by renewed concerns over sovereign debt contagion in the euro zone, after Spain’s Aa2 rating was placed on review for possible downgrade by Moody’s and the country’s prime minister called early elections.
Also Friday, the Swiss National Bank reported a first-half consolidated loss of CHF10.8 billion, owing to the Swiss franc’s sharp appreciation against the dollar and the euro.
The euro and the dollar account for about 80% of the Swiss central bank’s currency reserves, so their depreciation over the reporting period weighed on the SNB’s balance sheet.
In the week ahead, the dollar looks likely to remain under pressure as investors await progress on a deal to raise the debt ceiling, while Friday’s non-farm payrolls will also be in focus. Meanwhile, Switzerland is to produce official data on retail sales and consumer prices.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, August 1
In the U.S., the Institute of Supply Management is to publish data on manufacturing activity. In Switzerland, markets are to remain closed for a bank holiday.
Tuesday, August 2
Switzerland is to publish government data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity. The country is also to publish data on manufacturing activity, a leading indicator of economic health.
In addition, the U.S. is to publish official data on personal consumption expenditures and personal spending, which is linked to consumer inflation.
Wednesday, August 3
In the U.S., payroll processing firm ADP is publish a report on non-farm payrolls, which leads government data by two days. In addition, the Institute of Supply Management is to publish data on service sector growth, a leading indicator of economic health. The U.S. is also to publish data on factory orders and crude oil inventories.
Thursday, August 4
The U.S. is to publish government data on initial jobless claims, a leading indicator of economic health.
Friday, August 5
Switzerland is to produce government data on consumer price inflation, which accounts for a majority of overall inflation.
The U.S. is to round up the week with government data on non-farm payrolls, as well as data on average hourly earnings and the unemployment rate.
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