Forexpros – The U.S. dollar ended the week sharply higher against the Swiss franc on Friday, rising to an almost eight-month high as concerns over debt contagion to core economies in the euro zone supported safe haven demand.
USD/CHF hit 0.9329 on Friday, the pair’s highest since April 1; the pair subsequently consolidated at 0.9294 by close of trade on Friday, climbing 1.30%.
The pair is likely to find support at 0.9107, the low of November 22 and resistance at 0.9329, Friday’s high.
Italian 10-year bond yields climbed to near unsustainable levels on Friday, rising above 7% even as the European Central Bank bought bonds in the secondary market.
The rise in Italian borrowing costs came after a disappointing auction of Italian government debt and fanned fears that the debt crisis in the region is deepening.
The auction came two days after Germany, the euro zone’s largest economy, missed its EUR6 billion sales target at an auction of 10-year bonds, in its least successful debt sale since the launch of the single currency.
Meanwhile, ratings agency Fitch warned that France could lose its triple-A credit rating if European Union leaders fail to take action to prevent the crisis from worsening.
Investors also remained jittery after German Chancellor Angel Merkel reiterated her belief that joint euro zone bonds would remove incentives for individual states to improve their fiscal discipline and rejected calls for an expanded role for the ECB in fighting the debt crisis.
Meanwhile, the Swiss franc also remained under pressure amid speculation that the Swiss National Bank may raise the targeted exchange rate against the euro from its current 1.20 level.
Earlier in the week, Switzerland’s President Micheline Calmy-Rey said the
overvaluation of the Swissie posed a serious threat to the economy and carried the risk of deflation and added that the Swiss National Bank was committed to “a substantial and lasting weakening of the franc.”
In the U.S., the super-committee created to cut the country’s deficit said that it failed to reach a deal, signaling that several tax programs, including a payroll-tax holiday, risk expiring at the beginning of next year. Still, ratings agency Standard & Poor’s reaffirmed it would keep the U.S.’s credit rating at AA+ after stripping the government of its top AAA grade on August 5.
In the week ahead, investors will be eyeing an auction of Belgian government debt on Monday after ratings agency Standard & Poor’s downgraded its rating on Belgium by one notch on Friday.
Euro zone finance ministers are to meet Wednesday to discuss details on leveraging the region’s bailout fund, although a major announcement is unlikely.
Also next week, the U.S. is to release its closely watched report on non-farm payrolls, while Switzerland is to publish government data on gross domestic product.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, November 28
The U.S. is to release official data on new home sales, a leading indicator of economic health.
Tuesday, November 29
Switzerland is to publish its UBS consumption indicator, an important indicator of economic health.
The U.S. is to release industry data on house price inflation as well as a report on consumer confidence, a leading indicator of consumer spending.
Wednesday, November 30
Switzerland is to publish the KOF economic barometer, which is designed to predict the direction of the economy over the following six months.
Later in the day, the U.S. is to release a closely watched report on non-farm payrolls compiled by payroll processing firm ADP, which leads government data by two days. The U.S. is also to release data on manufacturing activity in the Chicago area as well as government reports on pending home sales, non-farm productivity, labor costs and crude oil stockpiles.
Thursday, December 1
Switzerland is to publish government data on GDP, as well as a report on manufacturing activity, a leading indicator of economic health.
Also Thursday, the U.S. is to release its weekly report on initial jobless claims, while the Institute of Supply Management is to data on manufacturing activity.
Friday, December 2
Switzerland is to release government data on retail sales.
The U.S. is to round up the week with a closely watched government report on non-farm employment change, a leading indicator of economic health, as well as data on average hourly earnings and the unemployment rate.
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