In the week ended August 12, the USD/CHF did slight rebound to halt its southern direction as the SNB monetary intervention and announcement pushed the franc lower from record high against the dollar. Following last week’s interest rate cut by the SNB, the bank in its battle to curb the franc’s advance decided to increase the supply of liquidity in markets, raise sight deposits to 120 billion francs from 80 billion francs and adopt foreign-exchange swap transactions to reinforce liquidity.
In addition, the SNB Vice President Thomas Jordan said that there are talks about pegging the franc giving further bearishness to the franc.
On the other hand, the dollar fluctuated as it benefited from being a safe haven amid the tensions and fears spreading in markets after the downgrade of the U.S. sovereign rating last Friday, yet it was under pressure due to sluggish growth and high debt the U.S. are suffering from.
In addition, the Fed pledge would keep record-low borrowing cost through mid-2013 and to use a wide range of tools to boost recovery that slowed down was considered week compared to other central bank’s interventions seen last week.
With the insistence of the SNB to halt the franc’s rally, the pair may continue its upside rebound in the coming period.
This week, the main focus will be on housing and inflation data from theU.S.while the Swiss economy lacks important fundamentals.
The release of the data will be as follows:
Monday August 15:
As of 07:15 GMT, the Swiss economy will release the only data for the week which is producer and import prices for the month of July. In theU.S., at 12:30 GMT, empire manufacturing for August will be out, where half an hour later, theUSwill release net TIC flows. The releases are not expected to have significant impact on the pair.
Tuesday August 16:
At 12:30 GMT, the market’s attention will be back to housing data with the release housing starts and building permits for July as it will provide evidence about the status of the housing market that triggered the 2008 crisis. Housing starts are predicted to retreat to 608,000 from 629,000 a month earlier, while building permits is set to decline to 606,000 from 624,000. At the same time, with lower relevance, import price index is due. At 13:15 GMT, industrial production and capacity utilization for July will be out.
Wednesday August 17:
MBA mortgage applications for August 12 will be available at 11:00 GMT, while the main focus will also be on inflation data with the release of PPI at 12:30 GMT, where the annual reading excluding food and energy will inch down to 2.3% from 2.4%, according to median forecasts.
Thursday August 18:
Eyes will be on a batch ofUSdata including important inflation data 12:30 GMT which is CPI which is expected to edge down to 3.3% in the year ending July from 3.6%. At the same time theUS, initial jobless claims for the week ending August 12 and continuing claims for the week ended August 6 will be available. Thereafter, particularly at 14:00 GMT, Philadelphia Fed, leading indicators and existing home sales will be out.
Friday August 19:
The week ends with the release no data from both economies, thus the pair is predicted to follow the general sentiment in the market.