ATF Trading Room

Jan. 24, 2019 (Western Union Business Solutions)  – The year’s first ECB Day got off to a soggy start for the euro which slipped to three-week lows against its U.S. rival. By contrast, the greenback enjoyed broad gains with Europe’s weak economy dominating the spotlight. Across the board gains lifted the U.S. dollar versus counterparts from Japan, Britain and Canada. Emerging markets were generally lower amid persistent concerns about a slowing world economy. As expected, the ECB left its benchmark interest rate unchanged at zero with markets now waiting on an 8:30 a.m. ET press conference by the central bank president, Mario Draghi. Ahead of the ECB’s first announcement of the year, Germany reported that its influential manufacturing sector unexpectedly contracted in January, which pointed to the bloc’s slowdown stretching into the new year. Also in focus today will be weekly data on U.S. jobless claims which are forecast to increase, albeit from historically low levels.

 

AUD

 

The Aussie dollar sank to three-week lows despite bullish jobs data from Down Under. Instead, the Aussie took its main cue from a move by one of Australia’s top banks to raise mortgage rates as it contends with rising funding costs. With the nation’s housing market cooling, higher mortgage rates could hasten a local interest rate cut from 1.50%, an already record low level. With borrowing rates dominating the Aussie conversation, it overshadowed jobs data that showed employers added 21,600 jobs in December, a larger than expected amount that pushed unemployment down by a notch to 5%.

 

EUR

 

The euro fell to 2019 lows after the ECB left interest rates unchanged and acknowledged that risks facing the 19-nation economy had intensified. ECB President Mario Draghi reiterated that the central bank expected to keep interest rate low through the summer, maybe long if necessary. The fact that Mr. Draghi expressed greater concern over the bloc’s economic health suggested a later rather than sooner rate hike. The prospects of lower rates for longer is negative for the euro but perhaps somewhat less so with the Fed not expected to boost borrowing rates any time soon.

 

GBP

 

Sterling’s weekslong run ran into resistance which coaxed the U.K. unit lower. The pound scaled 10-week highs this week as growing expectations that Britain might delay its departure from the EU or perhaps put the Brexit impasse up to a second referendum. While the market appears less fearful of a dreaded no deal, hard Brexit, such a dire scenario hasn’t been removed from the table and could quickly return to undercut the pound.

 

USD

 

The dollar maintained a gain after spectacular news on America’s job market. Weekly jobless claims unexpectedly fell by 13,000 to 199,000, the lowest in nearly 50 years. The data may have been skewed by a holiday, however. Still, the underlying trend was consistent with the labor market retaining broad strength which bodes well for future hiring and wage growth. America’s record-long government shutdown could restrain the dollar by clouding the economy’s true health since several data releases have been delayed.

 

CAD

 

Lower oil prices and a stronger U.S. dollar kept Canada’s so-called loonie pinned near two-week lows. Crude, a top driver of Canada’s commodity influenced currency, fell by 0.5% to below $53. The price of oil could see surprise volatility over the short run given the political crisis in Venezuela. Loonie fundamentals suffered a setback this week in data showing a bigger than expected retreat in Canadian consumer spending, a potential harbinger of weaker growth over the final quarter of 2018.


USA 

Oct. 24, 2018 (Western Union Business Solutions) –  For the first time ever, the European Commission has requested a euro area country to revise its draft budget plans. Italy is not backing down though, and the far-right Deputy Prime Minister Matteo Salvini believes the new measures are necessary to restore economic growth. The proposed budget deficit of 2.4% of GDP is triple the amount forecast by the previous government. Despite being below the 3% deficit limit under eurozone rules, the Commission has given Italy three weeks to present a new plan or face possible fines.   A Reuters report suggested Brexit will be completely overshadowed if the Italian budget crisis escalates.  Italy’s debt to the European Central Bank (ECB) is vast and it is unlikely the central bank will want to buy more Italian bonds than planned. The ECB is expected to end its quantitative easing programme by year-end, making its policy meeting an important event tomorrow.

 

CAD

 

The Bank of Canada is expected to increase interest rates from 1.5% to 1.75% today at 10am EST. A rate hike today could help the Canadian dollar strengthen having been under heavy selling pressure due to a run of poor economic data and the recent fall in oil prices.

 

EUR

 
Economic growth fears in the Eurozone have caused the euro to continue to slide against a basket of currencies. During European trading PMI surveys across the Eurozone showed growth had slowed much faster than originally anticipated, German private sector growth reported slowing to the lowest level in over three years while manufacturing in France hit a two year low. Unsurprisingly market reaction has been unfavourable for the euro, causing it to slide 0.8% against the dollar.

 

GBP

 
Prime Minister Theresa May will meet with conservative lawmakers at a private meeting in parliament as she seeks to calm growing tensions over her Brexit strategy. Ms May will address the “1922 Committee” of backbenchers in her conservative party and attempt to convince them agree to with her proposal. A vote of no-confidence against the PM would be triggered if 48 conservative lawmakers submit letters to the chairman of the 1922 committee to demand such a vote. The Sunday Times said 46 have already been sent. If the PM is unable to convince the Tory backbenchers to support her, this could become a huge risk to the PM’s job and to Sterling.

Oct. 18, 2018 (Western Union Business Solutions) –  The U.S. dollar steadied after a Fed-inspired surge overnight to one-week peaks. The greenback was mostly flat against rivals from Europe, Japan and Canada after pushing to its strongest levels since at least Oct. 11. The Aussie dollar was an outlier with gains of its own that came on the back of bullish domestic jobs data. America’s currency got a lift from the latest Fed minutes that showed policymaking mulling how high to boost borrowing rates with the economy in strong shape. The positive for the buck was that the minutes toyed with the notion of increasing rates so high that it restrains growth to ensue the lid stays on inflation. The dollar succumbed to some profit-taking ahead of a slew of U.S. data Thursday on weekly jobless claims, the Philly Fed index and leading indicators.

 

GBP

 

Sterling descended to one-week lows after a high stakes Brexit summit came and went with little to no progress. Adding salt to the pound wounds: U.K. retail sales disappointed with a bigger than expected fall by 0.8% in September, the weakest in 6 months. The data came on the heels of British inflation slowing toward the Bank of England’s 2% goal which fit with the outlook of area borrowing rates staying put over the foreseeable future, a dovish view compared to the hawkish Fed that’s on track to raise rates again this year. The prospect of prolonged uncertainty over Brexit bodes negatively for sterling’s coming prospects.

 

CAD

 

A sharp slide in oil knocked Canada’s commodity-driven currency to one-week lows. Oil moved below $69 a barrel Thursday, a day after staging a 3% plunge. A lack of meaningful Canadian data until tomorrow has led the loonie to take its main cue from oil markets. Come Friday, underlying Canadian inflation is forecast to remain around 2%, the Bank of Canada’s sweet spot, while retail sales are expected to rise by a solid 0.3% for a second straight month. Outcomes near or better than expectations would help to green light a rate hike to 1.75% from 1.50% on Oct. 24 when the central bank issues its next policy decision.

 

JPY

 

The yen tracked major currencies lower against the greenback which clocked one-week peaks versus its Japanese rival. The yen tested the weaker end of its range after the latest Fed minutes showed widespread conviction in policymakers boosting borrowing costs at a continued gradual pace over the coming year which differs from the outlook for Japan where interest rates are expected to remain below zero for the foreseeable future to support the world’s tepidly growing No. 3 economy. Still, downside for the yen has been capped by volatile stock markets, suggesting USDJPY strength may come in dribs and drabs.

 

USD

 

Better than expected U.S. data kept the dollar near one-week peaks. The decline in weekly jobless claims to 210,000 from a revised 215,000 was better than forecasts of a print of 212,000. The Philly Fed index of Mid-Atlantic factory growth slowed less than expected to 22.2 for October, above forecasts of 20.5. The data fit with the thesis of a strong economy and the Fed pushing rates higher over coming quarters.

 

Sept. 28, 2018 (Western Union Business Solutions) –  The U.S. dollar is closing out the quarter on a run with solid gains Friday. After abandoning the dollar over recent weeks and sending it to multimonth lows, the market has embarked on a new buying spree of the U.S. unit which soared to two-week highs overall and to 2018 peaks against the yen. Down more than 0.5%, the euro led losses against the dollar as it plunged in response to twin negatives from Europe. Italy announced a bigger than expected budget deficit which undermined market confidence in Rome’s ability to service its massive debt burden. Core inflation in the euro zone unexpectedly weakened below 1%, dealing a blow to ECB optimism in prices making a vigorous comeback. The dollar also strengthened against sterling and emerging markets but was little changed against Canada and Switzerland. Big ticket data are due today on the American consumer and inflation, and July growth from Canada.

 

USD

 

The greenback kept near session peaks after largely in line with expectations U.S. data. Both consumer income and spending increased by 0.3% in July. Included in the data was the Fed’s main gauge of underlying inflation which steadied at an annual rate of 2%. The data suggested full steam ahead for the Fed to deliver a fourth and final rate hike of the year by December. Still, with inflation remaining low and stable, it’s unlikely to meaningfully add to the dollar’s recent burst of strength since tame prices won’t pressure the Fed to tighten policy at a faster pace.

 

EUR

 

A double dose of discouraging news from Europe sent the euro tumbling more than 0.5% to two-week lows. Italy announced a debt to GDP budget deficit of 2.4%, a higher than expected amount that rattled market confidence in Rome managing one of the bloc’s biggest debt piles. While the 2.4% level is below the EU’s 3% ceiling, it’s higher than the market had expected. Rome appears to be wagering that by stepping up spending it would boost government revenue which could then be used to pay down the deficit. The danger is that if Rome’s game plan should backfire it could heap pressure on the ECB to backstop its finances or risk unleashing another sovereign debt crisis. Area data also served as a euro sell signal as core inflation unexpectedly slowed to 0.9% in September, a move further away from the ECB’s just below 2% goal. The data is seen as a setback to ECB hopes of a vigorous bounce back in inflation, a narrative that has supported the euro.

 

CAD

 

Canada’s dollar defied the stronger greenback to push higher after better than expected area growth was supportive of the Bank of Canada increasing borrowing rates next month. Canada’s economy bounced back by growing 0.2% in July, the start of the third quarter, after flatlining in June. The data, coming in above forecasts of 0.1%, increased the likelihood of a BOC rate hike to 1.75% from 1.50% on Oct. 24 to nearly 80% from about 70% Thursday.

 

JPY

 

The yen closed out the quarter at fresh 2018 lows, pressured by a broadly stronger greenback. The opposing paths of monetary policy in Japan, which is expected to remain low and south of zero for a long time yet, and the Fed which raised rates this week and expects to deliver more also served as a significant weight on the Japanese currency.

Sept. 25, 2018 (Western Union Business Solutions) – The U.S. dollar was mostly listless ahead of an expected interest rate hike by America’s central bank. The euro kept firm near three-month peaks thanks to hawkish comments this week by the head of the ECB. Sterling was also positive while the yen fell to fresh two-month lows as safer plays struggled with global stocks higher. Canada’s dollar steadied near one-week lows as elevated trade tensions overshadowed higher oil prices above $72. The Fed starts a two-day policy meeting today that’s all but guaranteed to deliver a ¼ point rate hike tomorrow. The buck’s lackluster tone is a sign that some think the Fed might not sound an overtly hawkish tone when it renders its decision Wednesday at 2 p.m. ET. Ahead of the Fed’s big announcement, on tap today are U.S. reports on home prices and consumer confidence with mild moderation on the cards.

 

JPY

 

The yen weakened to its lowest in more than two months, pressured by expectations of a U.S. rate hike this week and higher global stocks, a backdrop that’s quenched investor appetite for safer plays. But to sustain its upturn, USDJPY would likely to make a clean break above resistance. Failure to do so could spark a technical turnaround for the Japanese currency.

 

USD

 

A sense the Fed may stop short of a hawkish rate hike this week largely accounted for the dollar’s lackluster performance. The Fed is widely expected to raise rates by a quarter percentage point to 2.25%. Being one of its quarterly meetings, the Fed will also provide a slew of forecasts for the economy and interest rates. With growth headwinds threatening on the horizon, the Fed could sketch a more cautious outlook for monetary policy. U.S. growth could slow next year with fiscal support likely to fade while trade spats threaten to crimp consumer sentiment and spending. Higher U.S. borrowing rates could also slow growth.

 

EUR

 

The euro kept close to three-month highs thanks to hawkish inflation remarks Monday from Mario Draghi, the head of the ECB. Mr. Draghi voiced confidence in inflation picking up in the months ahead which euro bulls read as a cue that the central bank may be closer than previously thought to raising borrowing rates from crisis lows. The ECB’s top economist today attempt to water down Mr. Draghi’s comments. Still, the euro’s big picture appears to be brightening on the perception that the Fed is approaching the end of its tightening cycle while the ECB is set to lift rates next year, a scenario that would erode the dollar’s yield advantage.

 

CAD

 

Canada’s dollar was mostly stationary near one-week lows as nagging trade tensions overshadowed a spike in oil to new multimonth highs above $72. Most of the trade concerns stemmed from the ongoing spat between the world’s two biggest economies, the U.S. and China, respectively. U.S.-Canada trade relations are also in focus ahead of a U.S. deadline for a new Nafta deal by Oct. 1. Downside appears somewhat limited for the Canadian currency with market odds showing a more than 80% chance of a local rate hike next month.

Sept. 21, 2018 (Western Union Business Solutions) – Solid gains against sterling helped the U.S. dollar bounce above multi-month lows. The greenback jumped the better part of 1% against the U.K. pound after an EU summit failed to make progress on Brexit negotiations, increasing the threat of a no-deal scenario that would spell heightened uncertainty for the British economy. The dollar also firmed against the euro and notched new two-month peaks against the yen. Canada’s dollar hovered near but below three-month peaks ahead of influential data today on domestic inflation and consumer spending. While firmer Friday, underlying sentiment has cooled toward the dollar as a moderation in trade war fears has tempered appetite for safer bets while some see the end of the Fed’s interest rate hiking cycle coming into focus after a series of increases since late 2015. The Fed’s Sept. 26 policy decision will be the focal point of a busy week ahead.

 

EUR

 

The euro softened after extending a rally above a key number to its highest in three months against the U.S. dollar. Receding fears of a global trade war have been a boon for the euro and a burden for the dollar as it’s catalyzed a bout of risk-taking which tempered investor appetite for safety and security in currencies like the dollar and yen. Data Friday showing weaker than expected factory growth in big economy Germany and the wider euro zone proved an excuse to book profit on the euro’s rise to June highs.

 

CAD

 

Canada’s dollar firmed toward three-month highs after the country’s economy seemingly put the fork in expectations for a local interest rate hike. Headline inflation cooled to an annual rate of 2.8% in August from 3% while one of the measures of core inflation that the Bank of Canada watches increased to 2% from 1.9%. Retail sales rose by 0.3% in July which was slightly under forecast though it helped that the previous reading got revised to a slightly smaller decline. On balance, the data were consistent with an economy that could use an inflation-checking rate hike to 1.75% from 1.50% at central bankers’ coming meeting on Oct. 24. Today’s data suggests that the upturn in the Canadian dollar to June highs is for real – at least ahead of the Fed next week.

 

JPY

 

The yen extended its descent to fresh two-month lows against the dollar as trade war tensions cooled and U.S. Treasury yields climbed. The yield on the benchmark 10-year Treasury rose further above the key 3% level that’s proven tough to sustain over recent months. U.S. yields are rising in the runup to next week when the Fed is expected to raise interest rates to 2.25% from 2% and keep the door open to another move in December and more in 2019.

 

GBP

 

Sterling led losses against the greenback Friday after an EU summit failed to make progress on Brexit with the parties continuing to squabble over a backstop for the Irish border which straddles Northern Ireland which is part of the U.K. and Ireland, a member of the EU. The less than congenial summit also added to an uncertain political backdrop on Britain where members of Prime Minister Theresa May’s Conservative party could still pursue a leadership change given the lack of meaningful progress on Brexit.

 

MXN

 

Mexico’s peso and most emerging markets came up for air Friday after staging a solid rebound in the wake of the dollar’s decline to three-month lows. The firmer dollar Friday put a brake on the EM rally. Yet EM currencies may have formed a tentative bottom thanks to proactive moves by area central banks, such as Turkey’s, to raise interest rates to help tackle high inflation and shore up their tattered currencies. Still, EM currencies could see renewed volatility next week, particularly if the Fed delivers a widely expected rate hike and should flag a faster pace of future increases to keep the strong U.S. economy from overheating.

 

USD

 

The dollar rebounded a bit from multimonth lows, but its underlying bias remained fragile. That’s because worries about a global economy-rattling trade war have moderated, diminishing safety flows into the U.S. unit while some are erring on the side of caution ahead of next week’s Fed meeting. While the Fed is all but certain to raise rates to 2.25% from 2% and keep the door unlocked to a December increase, the outlook for rate increases in 2019 is less certain. The Fed could signal that, after a series of rate increases since late 2015, it’s nearing the end of its rate rising rope, having raised rates at nearly every other meeting since late 2015. A less than hawkish outlook for rates next week would leave the dollar at risk of further losses.

Sept. 6, 2018 (Western Union Business Solutions) – The U.S. dollar retreated from multiweek highs as big rivals from Europe staged a recovery. The dollar softened below two-week highs and surrendered gains after powering this week to its highest in two years versus counterparts from Australia and South Africa. The recent rout in emerging markets subsided, allowing the Mexican peso to stabilize above two-month lows. Headwinds on the euro and sterling have shown signs of abating. Italy appears less inclined to ramp up deficit spending, a stance that has eased pressure on the nation’s bond yields, making government borrowing more affordable. In Britain, the latest headlines on Brexit have sounded cautiously optimistic about the nation eventually striking a trade agreement with the EU that would allow it to avoid a potentially economy-damaging exit from the bloc. Downside for the U.S. currency appears limited given ongoing trade war concerns. U.S. numbers today on jobs and services growth could potentially foreshadow tomorrow’s nonfarm payrolls report.

 

GBP

 

Sterling catapulted above two-week lows on reports that Britain and Germany had softened their demands for a Brexit deal for the former. While Germany reportedly refuted the news, it gave nascent rise to hopes that Britain would eventually reach an uncertainty-reducing trade deal in time before its planned exit from the bloc in March 2019.

 

CAD

 

Canada’s dollar steadied above 6-week lows as it looked for direction from U.S.-Canada trade talks in Washington. The loonie registered little more than a yawn Wednesday after the Bank of Canada left interest rates at 1.50% as expected and issued a largely status quo statement that flagged higher rates and elevated uncertainties with respect to Nafta negotiations. The market currently sees a more than 50% likelihood of the BOC raising rates to 1.75% when it next meets on Oct. 24. But much should hinge on Nafta and coming data like Friday’s Canadian jobs report that’s forecast to show an uptick in unemployment to a still low 5.9% for August.

 

EUR

 

The euro rose above two-week lows as it largely shadowed sterling higher. Meanwhile, concerns about the indebted state of Italian finances have moderated on signs the new coalition government in Rome is reconsidering plans to blow out the budget with deficit spending. That’s allowed Italian government borrowing rates to decline. Upside traction may prove limited for the euro after German data disappointed and showed a surprise plunge of nearly 1% in industrial orders in July, evidence that trade war uncertainties have impacted the real economy.

 

USD

 

The dollar favored session lows after mixed news on America’s job market. On the bright side, weekly jobless claims unexpectedly improved, hitting the lowest in nearly 50 years of 203,000. But another survey by payrolls firm ADP raised questions about the sustainability of the U.S. economy’s bull run. The ADP survey showed a big drop off in hiring in August to 163,000 from an increase of 219,000 in July. The latter report potentially foreshadows an underwhelming nonfarm payrolls jobs report Friday.

 

Sept. 4, 2018 (Western Union Business Solutions) – The U.S. dollar dashed out of the gates to a new month as a familiar them continued to unnerve markets: fears of a global trade war. The buck posted across the board gains with the biggest coming against export-reliant emerging markets. Mexico’s peso hit two-month lows while South Africa’s rand flirted with two-year lows. European currencies struggled with the euro and sterling hitting more than one-week lows. Canada’s dollar slipped to more than two-week lows despite a 2% rally in oil to above $71. This is the week that the U.S. could slap another round of tariffs of $200 billion on China. It’s also the week that the U.S. economy will release important data that could keep the Fed on a higher rate path over the rest of the year. America will release manufacturing data today, trade tomorrow and the granddaddy of them all: nonfarm payrolls on Friday.

 

CAD

 

The Canadian dollar returned from a long holiday weekend at its lowest in 2 ½ weeks. The coming week is chock-full of risk events with the Bank of Canada rendering an interest rate decision Wednesday, the same day that the U.S. and Canada are expected to return to the Nafta negotiating table. Data on trade and employment are also due this week. Of fundamental importance will be the BOC which is forecast to leave interest rates parked at 1.50% given trade uncertainties and news last week that Canada’s economy grew at a slightly slower than expected pace last quarter. No rate hike but a firm signal of a potential rate increase to 1.75% as soon as next month would tend to support Canada’s currency.

 

GBP

 

Sterling got off to a soggy start to the month as it backpedaled to 1 ½ week lows against the greenback. The ever-present uncertainties related to Brexit gnawed at the pound while it didn’t help that a pair of U.K. PMI surveys this week on manufacturing and construction underwhelmed, potentially heralding a similar outcome for the more important services sector index Wednesday. Nevertheless, forecasts call for the economy-driving services sector to grow at a slightly quicker rate of nearly 54 for August.

 

USD

 

The U.S. dollar got off to a quick start to the month with trade uncertainties running high, along with expectations for a solid showing from the U.S. economy this week. The ISM index of manufacturing growth comes out today, followed by the politically-sensitive trade deficit Wednesday and nonfarm payrolls Friday. Forecasts call for quicker hiring in August (190K vs July’s 157K), lower unemployment (3.8% vs 3.9%) and steady wage growth of 2.7%. Outcomes near or better than expected would help to cement a Fed rate hike to 2.25% from 2% on Sept. 26 and keep the door ajar to another increase by year-end, a scenario that could keep the greenback well-supported.

 

EUR

 

The euro hit 1 ½ week lows as risk-averse traders sought the U.S. dollar’s relative safety. Once again, markets are unsettled by the prospect of the U.S. ramping up tariffs on China whose economy has shown growing signs of weakness. Meanwhile, a report Monday on German manufacturing fared weaker than expected, an outcome that reinforced expectations for the ECB next week to leave area borrowing rates at rock bottom levels.

 

MXN

 

The peso crashed to two-month lows as risk-off markets, coupled with expectations of higher U.S. interest rates, took a toll on a range of emerging markets. U.S.-China trade tensions are in the spotlight with markets positioning for the former to slap more tariffs on the latter as soon as this week. Meanwhile, China’s economy has shown mounting signs of weakness which only adds to dollar-positive global uncertainties.

Mar. 17, 2018 (Allthingsforex.com) – The USD managed to post gains against the CHF after the Swiss National Bank decided to leave rates unchanged at the record low -0.75% and promised to “remain active in the foreign exchange market as necessary, while taking the overall currency situation into consideration.” In other words, expect the ultra-accommodative monetary policy to remain unchanged for quite some time and that the central bank is ready to ease further or to intervene should market and economic conditions warrant such actions.

As a result, the USD targeted last week’s resistance at 0.9535 and even managed to overshoot it by 12 pips to 0.9547. The readers familiar with The Quarters Theory would already know that such move should not yet be considered as a decisive breakout. However, if we continue to see more attempts at the 0.9550 area in the week ahead, we might eventually witness an actual breakout that could extend the USD rally towards the next Large Quarter Point at 0.9750. Of course, this is all provided there are no news from Washington or elsewhere in the world that spook investor sentiment and trigger a flight to safety, strengthening the CHF.

For those who care to read the official monetary policy statement as published by the SNB, please see below:

Monetary policy assessment of 15 March 2018

Swiss National Bank leaves expansionary monetary policy unchanged

The Swiss National Bank (SNB) is maintaining its expansionary monetary policy, with the aim of stabilising price developments and supporting economic activity. Interest on sight deposits at the SNB is to remain at –0.75% and the target range for the three-month Libor is unchanged at between –1.25% and –0.25%. The SNB will remain active in the foreign exchange market as necessary, while taking the overall currency situation into consideration.

Since the last monetary policy assessment in December, the Swiss franc has appreciated slightly overall on the back of the weaker US dollar. The Swiss franc remains highly valued. The situation in the foreign exchange market is still fragile and monetary conditions may change rapidly. The negative interest rate and the SNB’s willingness to intervene in the foreign exchange market as necessary therefore remain essential. This keeps the attractiveness of Swiss franc investments low and eases pressure on the currency.

The SNB’s conditional inflation forecast has shifted slightly downwards as a result of the somewhat stronger Swiss franc. The forecast for the current year has decreased marginally to 0.6%, from 0.7% in the previous quarter. For 2019, the SNB now expects inflation of 0.9%, compared to 1.1% last quarter. For 2020, it anticipates an inflation rate of 1.9%. The conditional inflation forecast is based on the assumption that the three-month Libor remains at –0.75% over the entire forecast horizon.

The international economic environment is currently favourable. In the fourth quarter of 2017, the global economy continued to exhibit solid, broad-based growth. International trade remained dynamic. Employment registered a further increase in the advanced economies, which is also bolstering domestic demand.

The SNB expects global economic growth to remain above potential in the coming quarters. Given the robust economic situation, the US Federal Reserve plans to continue its gradual normalisation of monetary policy. In the euro area and Japan, by contrast, monetary policy is likely to remain highly expansionary.

In Switzerland, GDP grew in the fourth quarter at an annualised 2.4%. This growth was again primarily driven by manufacturing, but most other industries also made a positive contribution. In the wake of this development, capacity utilisation in the economy as a whole improved further. The unemployment rate declined again slightly through to February. The SNB continues to expect GDP growth of around 2% for 2018 and a further gradual decrease in unemployment.

Imbalances on the mortgage and real estate markets persist. While growth in mortgage lending remained relatively low in 2017, prices for single-family houses and owner-occupied apartments began to rise more rapidly again. Residential investment property prices also rose, albeit at a somewhat slower pace. Owing to the strong growth in recent years, this segment in particular is subject to the risk of a price correction over the medium term. The SNB will continue to monitor developments on the mortgage and real estate markets closely, and will regularly reassess the need for an adjustment of the countercyclical capital buffer.”

 

 

 

Dec. 8, 2017 (Tempus Inc.) - The U.S. Dollar improved once again this week based on positive global market sentiment and the passing of a two-week agreement that avoids a government shutdown.

USD

The outlook of congressional consensus on a spending bill remains a concern, but investors welcomed the relief. Per the Bloomberg Dollar Spot Index, the “buck” has gained for a fifth consecutive day, its best appreciating streak since March.

Non-Farm Payroll figures revealed an expansion of 228K jobs, exceeding expectations of 195K. Nevertheless, the overall bag of data this morning came in mixed as Average Hourly Earnings managed to grow by just 0.2% instead of the estimated 0.3%. Wage growth is imperative for an optimistic economic outlook and revised October numbers surprised with a contraction. Unemployment stayed put at 4.1%. The greenback is seesawing as markets react.

EUR

The Euro is trading in lower ranges as good news overnight for the U.S. hurt the shared currency. Equity markets rallying also diminished the Euro’s role as a safe-haven.

Additionally, Industrial Production numbers in Germany came in much lower than predicted with 0.9% growth when economists calculated 1.4%. It is likely the currency will stay quite sensitive to changes in other regions with data already a negative factor leading towards depreciation last seen in over two weeks.

GBP

The Pound saw a lot of up-then-down action overnight with a Brexit breakthrough which now points to advancements in the historic negotiations. Prime Minister Theresa May achieved a deal with European Union officials that puts to rest concerns over an Irish border, a final bill, and the protection of rights of EU citizens within Britain. Basically, the PM decided the best route to end deadlock in talks was to follow a path towards a very soft Brexit.

“Leave” campaign political heads seemed highly dissatisfied while stock markets flourished. It seems like the domestic political instability remains a downside risk for Sterling as well as the unknowns regarding a future with less access to European markets. Progress in talks originally boosted GBP, but the doubts and uncertainties that cloud the situation prevented further gains.