Forexpros – Last week saw the Swiss franc tumble against both the dollar and the euro, after Tuesday’s shock introduction of an exchange rate ceiling at 1.20 per euro, by the Swiss National Bank.
USD/CHF hit 0.7820 on Monday, the weekly low; the pair subsequently consolidated at 0.8834 by close of trade on Friday, jumping 10.92% over the week.
The pair is likely to find support at 0.8569, Thursday’s low and resistance at 0.8946, the high of May 13.
Switzerland’s central bank set a minimum exchange rate target of 1.20 per euro for the Swiss franc, saying the massive overvaluation of the currency posed an acute threat to the Swiss economy and carried a risk of deflation.
“The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities,” the bank said.
The move came after a month long campaign to weaken the franc failed to stem safe haven inflows into the currency, as concerns over the outlook for global growth mounted.
The greenback was boosted after U.S. President Barack Obama outlined a USD447 billion package of tax cuts on Thursday, which he said would “jolt” the U.S. economy back into growth.
Federal Reserve Chairman Ben Bernanke gave no hint of new stimulus to boost the economy in a keenly awaited speech on Thursday.
Meanwhile, the euro weakened against the Swiss franc on Friday, amid mounting concerns over a possible Greek default and after the shock resignation of a top European Central Bank policymaker but the single currency remained close to its newly established ceiling, closing down 0.71% at 1.2036.
Elsewhere, finance ministers and central bankers from the Group of Seven industrialized nations pledged a coordinated response to the global slowdown on Friday, but offered no specific steps to revive growth.
In the week ahead, markets will be focusing on developments in the euro zone and the outcome of the weekend meeting of G7 leaders. Investors will also be closely watching Thursday’s rate statement by the SNB.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, September 12
In the U.S., Federal Reserve Bank of Dallas President Richard Fisher is to speak; his comments will be closely watched for clues to the future direction of monetary policy.
Tuesday, September 13
The U.S. is to release official data on import prices, an important inflationary indicator, as well as data on the federal budget balance.
Wednesday, September 14
Switzerland is to release official data on producer price inflation, a leading indicator of consumer inflation.
In the U.S., Treasury Secretary Timothy Geithner is to speak; his comments will be closely watched by investors. In addition, the U.S. is to release government data on producer price inflation, crude oil stockpiles, business inventories and retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity.
Thursday, September 15
Switzerland is to produce government data on industrial production, a leading indicator of economic health. In addition, the SNB is to announce is benchmark interest rate. Following the announcement, the bank will release its rate statement, which will discuss monetary policy in detail.
The U.S. is to publish a string of data, with government reports on consumer price inflation and the nation’s current account, as well as the weekly report on initial jobless claims. The country is also to publish official data on manufacturing activity in New York and Philadelphia in addition to reports on industrial production and the capacity utilization rate.
Friday, September 16
The U.S. is to round up the week with official data on the balance of domestic and foreign investment in U.S. Treasuries, while the University of Michigan is to release preliminary data on consumer sentiment and inflation expectations.
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