Swiss franc gains after hawkish SECO report
Crude oil price bounced back after dropping to the five-month low following yesterday’s crude oil inventories from the United States. The data showed that the US added more than 2 million barrels in its inventories, which was higher than the expected drawdown of more than 480k barrels. The bounce was caused by both technicals and fundamentals. On technicals, crude oil had just formed a double bottom pattern. On fundamentals, two tankers headed to Asia came under attack as tensions with Iran continued to rise.
The Australian dollar declined even after the strong jobs numbers released earlier today. In May, the unemployment rate remained unchanged at 5.2%. This was slightly worse than the expected 5.1%. In the month, the participation rate increased to 66%, which was higher than the expected 65.8%. The employment change increased by 42.3k, which was better than the expected 16k. The full employment change increased by 2.4k after falling by 6.3k in April.
The Swiss franc rose after the Swiss National Bank (SNB) left interest rates unchanged at -0.75% as expected. This came shortly after the government upped its economic growth forecast for the year to 1.2% in the State Secretariat for Economic Affairs (SECO) report. It also warned of the risks to the global economy including the uncertainty over Brexit, the ongoing trade conflict between the United States and China, and the worsening Italian financial situation. In March, SECO had forecasted an economic growth of 1.1%. This forecast came after recent data that showed that the Swiss economy rose by 0.6% in the first quarter, which was double the rate at the end of the year. It expects the economy to grow by 1.7% in 2020. In the monetary policy statement, the bank said that:
The SNB policy rate replaces the target range for the three-month Libor used previously, and currently stands at −0.75%. The SNB’s monetary policy thus remains as expansionary as before. Interest on sight deposits held by banks at the SNB currently corresponds to the SNB policy rate and remains at −0.75%. The SNB will seek to keep the secured short-term Swiss franc money market rates close to the SNB policy rate. SARON is the most representative short-term money market rate today, and is also establishing itself as the reference rate for financial products.
The euro was relatively unmoved against the USD as traders received the inflation numbers from Germany. The data showed that in May, consumer prices rose by an annualized rate of 1.4%. This was in line with expectations. The harmonized index of consumer prices (HICP) rose by an annualized rate of 1.3%. Investors also focused on the tough words from Donald Trump, who said that the US will sanction firms that are constructing the Nordstream 2 pipeline from Russia to Germany.
The USD/CHF pair declined after the SECO report and the SNB decision. The pair, which was previously moving up declined to a low of 0.9930, which was the lowest level since yesterday. On the annualized chart below, the price is between the 23.6% and 38.2% Fibonacci Retracement levels and along the lower line of the Bollinger Bands. The Moving Average has also continued moving lower. While the pair could move lower, there is a likelihood that it will resume the upward trend.
The XBR/USD pair rose sharply today after reaching a low of 59.05. This was the lowest level since June 5. On the hourly chart, it was a double bottom pattern, which means that the upward trend that ensued was expected to happen. The current price of 62.07 is above the 25-day and 14-day moving averages and along the upper line of the Bollinger Bands. The pair is likely to continue moving higher.
The EUR/USD pair was relatively unmoved after falling to a low of 1.1280 yesterday. As of writing, the price is trading at the 1.1296 level, which is slightly lower than the important psychological level of 1.1300. On the hourly chart, the price is along the middle line of the Bollinger Bands and along the 14-day moving averages. The dots of the Parabolic SAR have moved lower than the price. The pair is likely to continue to consolidate ahead of the US retail sales expected tomorrow.