Forexpros – The U.S. dollar strengthened against the Swiss franc last week, as concerns over the worsening debt crisis in the euro zone boosted demand for the greenback as a safe haven.
USD/CHF hit 0.8917 on Thursday, the pair’s lowest since September 21; the pair subsequently consolidated at 0.9077 by close of trade on Friday, gaining 0.42% over the week.
The pair is likely to find support at 0.8917, Thursday’s low and resistance at 0.9181, the high of September 22 and a five-month high.
Concerns over the economic outlook for the euro zone escalated on Friday after preliminary data showed that the rate of inflation unexpectedly surged to an almost three-year high in September.
The report dampened expectations that the European Central Bank may lower borrowing costs at this week’s meeting, in an attempt to shore up growth.
The greenback also found support after official data showed that consumer spending in the U.S. rose 0.2% in August after a revised 0.7% increase the previous month.
The report came after data on Thursday showed that the U.S. economy grew slightly more than previously reported in the second quarter. In its final estimate for the quarter, the Commerce Department said gross domestic product grew at annual rate of 1.3%, the up from the previously estimated 1.0%.
Earlier in the week, Germany’s parliament approved an expansion of the powers of the euro zone’s bailout fund, the European Financial Satiability Facility. The European Commission said the expanded rescue fund is set to be in place by mid-October.
Meanwhile, international inspectors remained in Athens to decide whether Greece should receive the next tranche of its EUR8 billion aid package.
The Swiss franc rose against the euro on Friday, even after Swiss National Bank President Philipp Hildebrand said the bank was ready to use “all measures” to defend the minimum exchange rate target.
Early last month, the SNB imposed a franc ceiling of 1.20 per euro and resumed purchases of foreign currencies to protect exports.
Hildebrand also that while Swiss economic growth will weaken in the second half of the year, the cap helped reduce the risk of recession and deflation in the Swiss economy.
On Tuesday, the Swiss KOF Economic Institute cut its 2011 forecasts for economic growth to 2.3% from 2.8%, citing the weakness in the U.S. economy, the debt crisis in the euro zone and the persistent strength of the Swiss franc.
In the week ahead, investors will be focusing on developments in the euro zone, while Friday’s data on U.S. non-farm payrolls is also likely to be a highlight. In addition, Switzerland is to release official data on retail sales and inflation.
Ahead of the coming week, Forex Pros has compiled a list of these and other significant events likely to affect the markets.
Monday, October 3
Switzerland is to produce official data on retail sales, the primary gauge of consumer spending, which accounts for the majority of overall economic activity as well as a government report on manufacturing activity.
Later in the day, the U.S. Institute of Supply Management is to publish data on manufacturing activity.
Tuesday, October 4
The U.S. is to release official data on factory orders, a leading indicator of production, while Federal Reserve Chairman Ben Bernanke is to speak in Washington; his comments will be closely watched for clues to the future possible direction of monetary policy.
Wednesday, October 5
The U.S. is to release a report on non-farm payrolls, compiled by payroll processing firm ADP, which leads government data by two days. Meanwhile, the ISM is to produce a report on service sector activity, a leading indicator of economic health. The country is also to release government data on crude oil inventories.
Thursday, October 6
Switzerland is to publish official data on consumer price inflation, which accounts for a majority of overall inflation.
Meanwhile, the U.S. is to release its weekly report on initial jobless claims.
Friday, October 7
Switzerland is to release official data on the unemployment rate, an important indicator of economic health.
The U.S. is to round up the week with the monthly report on non-farm payrolls, which is a leading indicator of job creation. The country is also to publish official data on the unemployment rate and average hourly earnings.
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