Forexpros – The U.S. dollar was lower against the Swiss franc on Friday, paring some of the week’s gains as market sentiment strengthened, dampening demand for the perceived safety of the greenback.
USD/CHF hit 0.9546 on Thursday, the pair’s highest since February 17; the pair subsequently consolidated at 0.9358 by close of trade on Friday, jumping 1.16% over the week.
The pair is likely to find support at 0.9246, Monday’s low and resistance at 0.9546, Thursday’s 10-month high.
Market sentiment improved on Friday after European Union leaders laid out a new agreement to tighten fiscal rules, easing concerns over the debt crisis in the euro zone, while investors were also cheered by Thursday’s stronger-than-expected U.S. employment and manufacturing data.
Earlier in the week, the Federal Reserve warned that market turbulence stemming from the crisis in the euro zone posed a threat to the U.S. economy but stopped short of indicating fresh stimulus measures to shore up growth.
Also Friday, Switzerland’s KOF Economic Institute cut its 2012 growth forecast to 0.2%, down from 1.5% in September and said the economy will dip into recession at the start of next year, with negative growth in the fourth quarter of 2011 and first quarter of 2012.
“Further intensification of the debt crisis would continue stifling the European economy and, by the same token, renew upward pressure on the franc,” the KOF said in a statement.
The Swissie jumped more that 1% against the greenback on Thursday after the Swiss National Bank kept its minimum exchange rate target of 1.20 per euro unchanged and reiterated its pledge to defend the level with the “utmost determination.”
The SNB warned of a highly uncertain global economic outlook, saying that a further escalation of the debt crisis in the euro zone could not be ruled out. The central bank also kept its key interest rate close to zero.
Meanwhile, investors are remaining pessimistic about the ongoing debt crisis in the euro zone, as the outlook continues to remain clouded by the risk of sovereign ratings downgrades across the single currency zone.
On Friday, Fitch Ratings announced that it lowered France’s rating outlook and put six other euro zone members on review for a downgrade, saying that a “comprehensive solution” to the euro-zone crisis is “technically and politically beyond reach.”
In the week ahead, investors will be keeping a close watch on Tuesday’s report on German business climate, to assess the impact of the debt crisis on the region’s largest economy. Meanwhile, the U.S. is to release key reports on the housing sector, durable goods and jobless claims.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday, as there are no relevant events on this day.
Tuesday, December 20
Switzerland is to publish official data on the trade balance, the difference in value between imported and exported goods over the month. Later Tuesday, the U.S. is to publish official data on building permits, an excellent gauge of future construction activity, as well as a report on housing starts.
Wednesday, December 21
The U.S. is to produce industry data on existing home sales, a leading indicator of economic health, as well as data on crude oil stockpiles and the treasury currency report.
Thursday, December 22
The U.S. is to publish its weekly report on initial jobless claims, a leading indicator of economic health. The country is also to produce revised data on third quarter GDP, while the University of Michigan is to release revised data on consumer sentiment and inflation expectations.
Friday, December 23
The SNB is to release its quarterly bulletin; however the impact is muted because a great deal of the data is released in the earlier, in the bank’s Monetary Policy Assessment.
The U.S. is to round up the week with official data on durable goods orders, a leading indicator of production as well as data on personal spending income, personal spending and new home sales.
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