A very volatile week ended for the EUR/CHF pair after swissy managed to rally to a new record versus the euro on the back of the prevailing debt woes.
To the end of last week the fears started to ease about the outlook for the euro area and the debt crisis which might help the euro this week recover some of the losses after ending with weekly gains last Friday versus the franc.
The euro area leaders finally announced a new bailout for Greece around 159 billion euros alongside extending the maturity on the EFSF loans to 15 years and cutting the interest to 3.5%. Also, the leaders expanded the scope of EFSF providing credit lines to states preemptively before they are forced to ask for assistance, also allow loans to governments to recapitalize banks and above all allow the ECB to intervene in the bond market if deemed necessary.
We saw the initial reaction positive on the market with the minimal invasive involvement of the private sector, yet they will still amount for nearly 50 billion of the bailout for Greece as the rest 109 billion will be covered by the euro area and the IMF.
This week will be about the assessment of the banks involvement as they write-down Greek debt as part of the bond buyback program. Fitch said that Greece will be under interim default and will soon return to a low investment-grade rating.
Still, the jitters will prevail as the bond buyback program starts and new debt is issued to replace the write-downs for banks which will include the interim default status and that keeps swissy still favored for more gains, yet for now the euro seems to be enjoying better odds with the contagion risk most importantly lower and that is the focus for the week.
Other news from the euro area and the Swiss economy to affect the pair this week:
Monday July 25:
Both nations are not due to release any fundamentals as the market sentiment will control the movement and will continue on the reaction to the emergency euro summit resolution and the debt ceiling developments in the United States as they will define the sentiment in the market and the trend for the pair.
Tuesday July 26:
Germany will start the day at 06:00 GMT with the Gfk Consumer Confidence Survey for August where the index is expected slightly lower at 5.6 from 5.7.
The Swiss economy will release the UBS Consumption Indicators at 06:00 GMT for June and whether the index improved from May’s 1.91.
Wednesday July 27:
Switzerland will start the day at 06:00 GMT with the KOF Swiss Leading Indicator for July and expected to slow to 2.10 from 2.23.
The euro area will start the week with the M3 Money Supply for June at 08:00 GMT, where the three month average is expected slightly higher at 2.3% from 2.2% and in the year to June it is expected to hold steady at 2.4%.
Germany is due to release the preliminary CPI estimate for July. Inflation is expected to have moved higher with 0.3% monthly gain following 0.1% and to hold at 2.3%. In EU Harmonized terms the index is expected to rise 0.3% on the month following a flat reading in July and on the year to hold at 2.4%.
Thursday July 28:
Germany will start the day at 07:55 with the jobs report for July. Unemployment change is expected with a drop of 17,000 improving from 8,000 thousand added in June. Unemployment rate seasonally adjusted is expected to hold at 7.0%.
Thursday is the euro area confidence day with the report due at 09:00 GMT. The Business Climate Indicator is expected to slow to 0.84 from 0.92, Economic Confidence expected to drop to 104.0 from 105.1; the Industrial Confidence expected also lower to 2.0 from 3.2 and Services Confidence to 9.4 from 9.9. The final estimate for Consumer Confidence is expected unrevised at -11.4.
Friday July 29:
The euro area will end the week at 09:00 GMT with the July CPI flash estimate where inflation is expected to have held steady at 2.7%.