SWISS FRANC RISES AFTER IMPRESSIVE Q2 GDP GROWTH
The Swiss Franc rose against the US dollar after the Swiss economy expanded faster than expected in the second quarter. Data from the State Secretariat for Economic Affairs (SECO) showed that the economy expanded at an annualized rate of 3.4%. This was higher than the expected 2.4% growth. On a quarter over quarter basis, the economy expanded by 0.7%, which was better than the expected 0.5%. The growth in the quarter was attributed to a resurgent manufacturing sector, which has experienced growth since the spring of 2017. The improving manufacturing sector also contributed to increased exports. Still, the SNB is not expected to hike rates in the near future.
The Japanese Yen was little moved after a board member of Bank of Japan (BOJ) criticized the move by the bank in July. Goushi Kataoka said that it was wrong for the bank to make its policy framework more sustainable. Instead, he argued that there was ‘no need for the bank to allow long-term interest rates to move in a wider range at a time when the bank is cutting its inflation forecast.’ The BOJ has continued to maintain negative interest rates with the aim of stimulating inflation. However, while the unemployment rate is low, the inflation has remained way below the target.
The euro traded above the USD even after Germany’s factory orders disappointed. Data from the statistics office showed that orders in July declined by minus 0.9%. This was worse than the expected growth of 1.6%. The decline was however slower than June’s decline of minus 3.9%. The data came a day after Markit reported that Germany’s composite for August was at 55.6, which was lower than the expected 55.7. The data showed that retail sales in Germany also slowed at a faster rate in July. The euro was higher than the US dollar because of the truce between Germany and the UK. In addition, the Italian Government Bonds have fallen from the previous 3.242 and are currently at 2.883. This happened after the new Italian government pledged to slash the budget.
Global stocks fell today as traders grew increasingly worried about the trade conflict between the US and China. Today is the final day for the public to comment on the proposed $200 billion tariffs and rumours are that Trump will impose the new tariffs as early as this week. The fears of tariffs led to Chinese and Hong Kong stocks falling. However, the trade data released yesterday by the US could cause Trump to pause. The data showed that the trade deficit with China was widening. This is because many American companies that source from China will just add price instead of coming back to the US or opening new plants elsewhere. On the other hand, China will use its might to diversify its sourcing – especially on agricultural crops – from other countries.
The US dollar fell slightly against its major peers after data from ADP disappointed. In August, the private sector created 163K jobs, which was lower than the expected 188K. Traders are now waiting for the official government data, which will be released tomorrow. In the past, the data from ADP has differed greatly from the official government data. Meanwhile, the Labour Department released impressive jobless claims data. The continuing job losses were at 1,707K, which was better than the expected 1,710K. Initial jobless claims were at 203K, which was worse than the expected 214K.
The EUR/USD pair fell to an intraday low of 1.1530. It then recovered these losses and is currently trading at 1.1647, which is above the 50 and 25-day EMA. It is also above the 61.8% Fibonacci Retracement level. The pair could attempt to test the resistance at the 1.1733 level but, the biggest swings will happen tomorrow when we receive the official employment numbers.
The USD/CHF pair reached a low of 0.9653 on Friday last week. Since then, the pair has attempted to gain and yesterday, it reached an intraday high of 0.9768. Today it fell and there is a likelihood that the pair will fall further, potentially to the 0.9653 level, where it will form a double bottom before starting to move up again. If it does, it will test the 1.9810 level.
The AUS200 index fell as traders worried about trade and increased interest rates. ANZ and Commonwealth Bank followed Westpac in lifting mortgage rates. The index fell to an intraday low of A$6136.6. This was the lowest level since July this year. It ended the day at A$6159.5. The current level is below the 50 and 100-day EMA. The RSI on the hourly chart moved from 19 and is currently at 36. The index could continue moving lower especially if Trump moves ahead with the $200 billion tariffs on China goods.