By FXEmpire.com

Introduction: News from the Euro and Swiss zone. EUR/CHF is frequently chosen for carry trades which involves going long a high-yielding currency (EURO – 3.50%) against a low-yielding one (CHF – 1.50%). Traders earn daily interest fees when holding this pair long (rollover fees).

  • The interest rate differential between the European Bank(ECB) and the Swiss National Bank(SNB)
  • Swiss and Euro zone fundamentals

Weekly Analysis and Recommendations:

The EUR/CHF continues its private battle between the euro bears and the SNB. The pair closed the week at 1.2017 and remained within a tight range all week from 1.2014 to 1.2025. This week’s KOF survey which came in well above forecast barely effected the pair.

Negative sentiment emanating from Spain and the political elections in France had no effect here.

Date

Last

Open

High

Low

Change %

Apr 20, 2012

1.2017

1.2023

1.2024

1.2014

-0.05%

Apr 19, 2012

1.2023

1.2021

1.2026

1.2017

0.02%

Apr 18, 2012

1.2021

1.2015

1.2034

1.2014

0.05%

Apr 17, 2012

1.2015

1.2020

1.2022

1.2014

-0.04%

Apr 16, 2012

1.2020

1.2025

1.2031

1.2017

-0.04%

The Swiss National Bank (SNB) remains committed to upholding the exchange rate floor of CHF 1.20 per euro. The floor is seen as a credible monetary policy tool – effective in reducing foreign exchange volatility – and investor confidence in the SNB’s ability to maintain the floor is strong. Nevertheless, at the latest rate-setting meeting the monetary authorities noted that even with the minimum exchange rate the franc is still very strong, and downside risks to price stability have intensified in recent months (although, February saw the first monthly gain in the consumer price index since September on the back of higher oil prices). The rate of inflation this year is now expected to average -0.6% y/y. The central bank believes that the economy is starting to show signs of improvement and projects modest growth of 1% for 2012 following last year’s 1.9% advance. Although the pace of growth slowed throughout 2011, the economy avoided a contraction, unlike many of Switzerland’s European peers who saw output fall in the fourth quarter

Major Economic Events for the past week actual v. forecast

CAD

Core Retail Sales (MoM)

0.5%

1.0%

-0.8%

USD

New Home Sales

328K

320K

353K

GBP

GDP (QoQ)

-0.2%

0.1%

-0.3%

GBP

GDP (YoY)

0.0%

0.3%

0.5%

USD

Core Durable Goods Orders (MoM)

-1.1%

0.5%

1.9%

USD

Interest Rate Decision

0.25%

0.25%

0.25%

NZD

Interest Rate Decision

2.50%

2.50%

2.50%

USD

Initial Jobless Claims

388K

375K

389K

USD

GDP (QoQ)

2.2%

2.5%

3.0%


Historical:

Highest: 1.5193 CHF on 10 Oct 2009.

Average: 1.3271 CHF over this period.

Lowest: 1.026 CHF on 10 Aug 2011.

Economic Highlights of the coming week that affect the Euro, GBP, CHF and the USD

Tue

May 1

4:30am

GBP

Manufacturing PMI

51.4

52.1

10:00am

USD

ISM Manufacturing PMI

53.0

53.4

Wed

May 2

4:30am

GBP

Construction PMI

54.2

56.7

8:15am

USD

ADP Non-Farm Employment Change

179K

209K

Thu

May 3

4:30am

GBP

Services PMI

54.6

55.3

7:45am

EUR

Minimum Bid Rate

1.00%

1.00%

8:30am

EUR

ECB Press Conference

8:30am

USD

Unemployment Claims

382K

388K

10:00am

USD

ISM Non-Manufacturing PMI

55.5

56.0

Fri

May 4

8:30am

USD

Non-Farm Employment Change

176K

120K

8:30am

USD

Unemployment Rate

8.2%

8.2%

Upcoming Government Bond Auctions

Date Time Country

May 01 09:30 UK

May 02 09:10 Sweden

May 02 09:30 Portugal

May 02 13:00 US

May 03 08:30 Spain

May 03 08:50 France

May 03 09:10 Sweden

May 03 09:30 UK

May 08 09:15 Austria

May 08 09:30 Belgium

May 08 14:30 UK

May 08 15:30 Italy

May 08 17:00 US

May 09 09:10 Sweden

May 09 09:30 Germany

May 09 09:30 Swiss

May 09 09:30 UK

May 09 14:30 Sweden

May 09 15:30 Italy

May 09 17:00 US

May 10 15:00 US

May 10 17:00 US

May 11 09:10 Italy BOT auction

May 11 10:00 Belgium

Originally posted here