nonfarm payrolls

Sept. 6, 2018 (Western Union Business Solutions) – The U.S. dollar was mostly flat as declines versus the euro, sterling and Norwegian crown offset gains against the Swiss franc and Australian dollar. Canada’s dollar hovered near late July lows with firmer oil above $68 helping to slow its descent. Market players are cautiously dipping a top into riskier waters, partly on signs that Italy might pursue fiscal prudence when Rome releases its 2019 budget in coming weeks. Easing concerns about the fiscal shape of the euro zone’s third biggest economy helped to eclipse ongoing trade war concerns that have rattled markets. Norway’s crown was a session standout performer after hotter than expected area inflation increased the risk of an interest rate hike from 0.50% next week. While steady, the greenback retained a bullish bias after strong U.S. jobs data last week validated Fed plans to raise interest rates a few more times this year.

 

GBP

 

Sterling firmed as it built on last week’s gain that came from reduced uncertainty related to Brexit. While Brexit remains a source of uncertainty for the pound, optimism is cautiously on the rise that Britain and the EU might ultimately find enough middle ground to agree on a trade deal in time to avert a potentially disorderly divorce. Sterling’s nascent upturn could hinge on U.K. unemployment data Tuesday and Thursday when the Bank of England issues a policy decision. No change in rates from 0.75% is expected but the tone of the central bank minutes could impact the pound.

 

USD

 

The greenback was mostly flat after a jobs-inspired rally Friday. Dollar fundamentals remains bullish after data showed the U.S. economy added more than 200,000 jobs in August while unemployment kept below 4% and the nearly 3% rise in wages marked the fastest pace in years. The data cemented expectations for the Fed to raise rates to 2.25% from 2% on Sept. 26 and keep the door wide open for further increases in December and 2019. The buck this week will take its cues from consumer prices Thursday and retail sales Friday.

 

CAD

 

Canada’s dollar underperformed and kept within arm’s reach of late July lows. The loonie lost ground after disappointing jobs data last week somewhat clouded the outlook for an imminent rise in domestic interest rates from 1.50%. Canada unexpectedly shed more than 50,000 jobs in August. But the fact that all the job losses came from less meaningful part time positions didn’t torpedo prospects of a rate hike to 1.75% as soon as Oct. 24.

 

EUR

 

The euro firmed after an overnight flirt with three-week lows. The euro bounced above multiweek lows on signs that Italy’s new coalition government would respect EU rules when it unveils its budget for next year some time over the coming weeks. Consequently, government borrowing costs declined, a sign of decreased investor worry that supported the euro. The ECB issues a decision Thursday. While area borrowing rates are expected to remain anchored at zero well into 2019, the central bank’s assessment of the growth outlook, if brighter, could be positive for the euro.

 

CHF

 

A 0.5% decline in the Swiss franc pulled the Alpine currency down from 5-month peaks hit last week. Haven assets are underperforming their riskier counterparts, like stocks, partly on diminished concerns about fiscal uncertainty in Italy, the euro zone’s No. 3 economy. Downside for the swissie could prove modest given persistent worries about a global trade war.


USA 

Sept. 6, 2018 (Western Union Business Solutions) – The dollar turned broadly positive after America’s jobs report surprised to the upside and showed the fastest wage growth in years, an outcome that put more U.S. rate hikes more firmly on the table. America added 201,000 jobs in August, a marked acceleration in hiring from a revised increase of 147,000 in July. Unemployment steadied at 3.9%. What stole the show for the dollar was the 2.9% annual rise in wages, a print consistent with inflation exceeding the Fed’s optimal rate of 2%. As a result, the Fed is all but certain to raise rates on Sept. 26 and likely again on Dec. 19. Bullish fundamentals, coupled with rising trade war fears, could prove a cocktail of U.S. dollar outperformance. Next week brings U.S. consumer inflation on Sept. 13 and retail sales the following day.

 

EUR

 

The euro was very little changed on the day and for the week against the dollar with few staking big bets ahead of America’s monthly jobs report. Italian-related headwinds on the euro subsided this week on signs that Rome’s new coalition government might play by the fiscal rules when it unveils its 2019 budget over coming weeks. Next week looms potentially large for the euro when the ECB issues a policy decision on Sept. 13. The central bank has seemingly ruled out a rate hike this year, putting the focus on officials’ level of confidence in the 19-nation economy. An upbeat assessment despite trade uncertainties would risk pushing the euro higher over the short run.

 

GBP

 

Sterling popped to one-week highs ahead of America’s influential jobs report, underpinned by cautious optimism in the U.K. and EU eventually sorting out their differences to reach a trade deal that helps to avert a hard, economy-squeezing exit from the bloc next year. While U.K. data was mixed this week, the most important indicator – services growth – showed a faster pace of expansion. While the news is unlikely to allow the Bank of England, which meets on Sept. 13, to contemplate an imminent rate hike from 0.75%, it was enough to temper negative sentiment toward the pound. Data on Sept. 11 will offer an update on U.K. unemployment whose 4% rate is the lowest in four decades and a source of sterling strength.

 

AUD

 

The rally in the U.S. dollar is alive and well versus its Australian counterpart which tumbled to 2 ½ year lows. The Aussie has been plagued by rising fears of the U.S. and China heading for a full-blown trade war. That spells bad news for Australia’s economy as it relies on global commerce as a chief growth engine. Moreover, expectations for U.S. and Australian interest rate differentials to widen further in the former’s favor is another source of negativity for the Aussie, particularly after the Reserve Bank of Australia this week flagged low rates for longer. Australia’s job market will be in focus next week. If unemployment on Sept. 13 holds around 6-year lows of 5.3% it could help spark a recovery in the Aussie.

 

CAD

 

Canada’s dollar turned lower after a dismal August jobs report made an October rate hike less likely. Canada shed more than 50,000 jobs in August which compared to forecasts of a modest gain (5K) which pushed up unemployment to 6% from a four-decade low of 5.8%. While all the job losses came from less desirable part time hires, wage gains moderated to a 2.6% annual rate from 3% in July, reinforcing the report’s weaker tone. The Bank of Canada this week reaffirmed that data hold the keys to the policy outlook. Consequently, today’s influential jobs report will deal a blow to expectations of an Oct. 24 rate increase to 1.75%, which is loonie-negative. Nevertheless, any constructive news on Nafta negotiations should help to slow the loonie’s jobs-induced descent.

 

 

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.

Aug. 31, 2018 (Western Union Business Solutions) – The U.S. dollar was mostly steady on the last day of the month as gains against the euro, sterling and Canadian dollar were offset by losses against the yen. An uptick in global trade anxiety has haven assets reigning. The latest signals from Washington hint at the U.S. upping tariffs on China as soon as next week. U.S.-Canada trade relations are also in focus ahead of a deadline today for the neighboring nations to make progress on a new Nafta pact. The euro softened after area inflation cooled and unemployment steadied above 8%, a still elevated level. August has proven a rollercoaster ride for the greenback which swung from one-year highs to one-month lows. The U.S. dollar index is on track for a narrow month-to-date gain.

 

MXN

 

Mexico’s peso, along with most emerging market currencies, surrendered more ground to the greenback on the month’s final day. The peso had rallied earlier this week on euphoria over the U.S. and Mexico agreeing in principle to a trade deal. The news hasn’t been enough to supplant worries about a U.S.-China-led global trade war, a scenario that’s spurring a flight to safety in the dollar and other havens.

 

CAD

 

Will the Canadian dollar finish the month with a gain against the greenback? The answer is shaping up to be a close call with the greenback enjoying a narrow MTD gain. Talks in Washington today between the U.S. and Canada hold the keys. Should officials reach a deal, it’s liable to spur a rally in the Canadian currency given that it sends three-quarters of its exports south of the border. No deal and the U.S. dollar is likely to finish August on top. Meanwhile, Canada’s economy this week stopped short of cementing a Bank of Canada rate hike from 1.50% on Sept. 5, as growth fell short of expectations and a gauge of wholesale inflation contracted in July. Key for the loonie from the BOC’s perspective will be whether Canada indeed holds fire on a rate hike next week and whether it tees one up for October.

 

USD

 

A rollercoaster August is on track for the greenback to cling to a gain. The buck raced to 14-month highs in mid-August only to see its upswing undercut after President Trump took a swipe at the Fed for raising rates. The buck hit one-month lows this week as fears of a global trade war diminished in the wake of the U.S. and Mexico brokering a deal in principle. Once back from the holiday weekend, attention will turn to the U.S. economy with the monthly jobs report on Sept. 7. Another month of strong job growth, low unemployment and higher wages would offer a recipe for a stronger dollar as it would keep the Fed on track for a late September rate hike.

 

EUR

 

A weaker euro Friday moved below one-month highs and was pacing a narrow month-to-date loss against the greenback. A still unsettled trade outlook between the U.S. and Europe, coupled with reminders of the still fragile shape of the bloc’s economy, put a headwind on the single currency. While the euro zone’s main gauge of inflation slowed a tick to 2% in August, a reading a bit above the ECB’s preference, less volatile core inflation remained anchored at a chronically low 1% which was consistent with the economy stuck in a low gear.

 

GBP

 

Sterling was poised for a bullish week but a bearish month in which it shed more than a penny against its U.S. rival. Sterling climbed out of a bearish range against the dollar this week after the EU’s lead Brexit negotiator sounded ready to offer Britain and unprecedented trade deal. The news, though, only provided a momentary boost to the pound as it didn’t erase the risk of Britain crashing out of the bloc without a trade agreement, a scenario that could subject the U.K. economy to significant downside risk.

 

Aug. 27, 2018 (Western Union Business Solutions) – The U.S. dollar started the week under pressure against the EUR with action subdued by a U.K. holiday. The dollar did not attract bids against big peers from Europe, Asia and Canada though it registered gains versus most emerging markets, led by a 3% jump versus the Turkish lira. Mexico’s peso was the exception is it rallied on signs that U.S. and Mexican authorities were making progress on updating Nafta. The buck is coming off a week of underperformance triggered in part by President Trump’s disagreement with the Fed raising interest rates. A signal last week by Fed Chairman Jerome Powell to gradually raise interest rates also undercut the buck by helping to stoke a stock rally that dampened demand for safer plays like the U.S. currency. The week ahead includes U.S. numbers on consumer confidence, revised second quarter growth and consumer spending.

 

GBP

 

Sterling got in the holiday spirit with a firm start to the week which allowed the U.K. unit to hold above recent 14-month lows. British markets are closed today for a bank holiday. A partial reversal in the dollar’s upswing has helped to alleviate downward pressure on the pound. Meanwhile, reports of tentative progress with Brexit negotiations between Britain and Brussels also translated into a firmer pound. A lack of U.K. data this week could see sterling look to Brexit developments and dollar movements for direction.

 

CAD

 

Canada’s dollar kept to a well-worn range against the greenback with holiday-subdued trading resulting in lackluster action. The market will use the coming week to fine tune expectations for the next increase in area borrowing rates. Thursday’s print of second quarter growth should help shed light on whether a rate hike from 1.50% comes as soon as September. Forecasts call a 3% annual rise in Q2 growth which would be the fastest pace in a year. The BOC next meets in 9 days on Sept. 5 with forecasts suggesting a less than 50% of a rate hike.

 

MXN

 

The peso powered to its strongest in two weeks on reports of the U.S. and Mexico making progress in updating Nafta. Recent uncertainty over the fate of Nafta has been a source of negativity toward the peso given that Mexico sends most of its exports north of the border. Upside for the peso was checked somewhat by emerging market weakness led by the Turkish currency’s renewed slide after markets there returned from an extended holiday.

 

USD

 

The dollar was mostly steady after a week of underperformance stemming from President Trump lambasting the Fed for raising rates while the central bank indicated that future rate increases would likely be gradual. Mr. Powell’s keynote speech in Jackson Hole, Wyo. last week was interpreted a dovish, noting a lid on inflation which effectively put one on the dollar. Thursday could prove the deceive day of the week for the dollar with data on personal income and spending and the Fed’s main gauge of inflation. Core inflation is forecast to tick up to 2% in July. Barring an upside surprise, the data may not be enough to excite dollar bulls given that the Fed has signaled a tolerance of allowing inflation to exceed its goal after missing it for many years.

 

EUR

 

The euro rose to its highest in 3 weeks against the greenback, buoyed by better than expected data on German business optimism. The Ifo survey topped forecasts with a 103.8 reading in August which offered evidence of modestly improved U.S.-German trade relations easing a headwind on the bloc’s biggest economy. Friday looms as the week’s most important day for the euro zone when it publishes central bank-impacting numbers on inflation and unemployment.

 

Aug. 21, 2018 (Western Union Business Solutions) – Reports that President Trump is not happy about the Federal Reserve raising interest rates hit the U.S. dollar which sank to eight-week lows. The dollar was broadly weaker Tuesday, having hit 6- and 8-week lows against the Swiss franc and yen and its lowest in nearly two weeks against the euro, sterling and Canadian dollar. The growth-bent U.S. president has reportedly taken exception with the Fed raising borrowing rates, something it’s expected to do for a sixth time under Mr. Trump’s watch in September. The dollar slipped on the president’s remarks as it called into question the Fed’s independence from political influence and gained added traction from dollar positioning having reached elevated levels of late. Yet pushing the dollar down for long could be a tough task with safer bets in vogue on worries about trade wars and Turkey’s economic crisis. Mr. Trump’s jab at the Fed puts heightened focus on a speech Friday by Fed chairman Jerome Powell.

GBP

Sterling shot nearly two cents above 14-month lows after the dollar fell prey to remarks from President Trump reportedly being displeased with the nation’s central bank raising interest rates, a move that he sees as an impediment to the U.S. economy achieving a faster cruising speed. Gains for the pound could be the short-lived variety given the headwind on the currency from how Britain is yet to strike a trade deal with the EU to keep from crashing out of the bloc come March.

USD

The U.S. dollar index flirted with two-week lows, as it fell victim to presidential criticism about the Fed raising interest rates. The remarks from President Trump came amid a lull in the economic calendar and at a time when market positioning was a bit stretched on the dollar, exacerbating its decline. Mr. Trump’s remarks put heightened focus on Fed Chairman Jerome Powell’s speech Friday at 10 a.m. ET at the central bank’s summer symposium in Jackson hole, Wyo. Should the Fed chairman signal full steam ahead for a rate hike in September it could help keep the dollar biased higher.

EUR

The euro got squeezed to its highest in nearly two weeks against the dollar which took on the chin remarks from President Trump that he reportedly isn’t happy about the Fed raising interest rates, moves that he sees as impeding his bid to shift the world’s biggest economy into a high gear. While the euro capitalized on the dollar’s retreat, gains could prove tough to sustain for long amid worries about Turkey’s economic crisis spreading to European banks.

YEN

The yen surrendered gains against the dollar that overnight had lifted it to 8-week peaks. The dust has started to settle after President Trump seemingly took a swipe at the Fed for raising rates, a blow that hit the dollar squarely on the chin. Still, the yen remains camped toward the upper end of its range as Mr. Trump’s call for lower rates exerted downward pressure on U.S. Treasury yields, capping upside in USDJPY.

CAD

Canada’s dollar romped to its highest in almost two weeks, boosted by rallying oil markets, up 1% to above $67, and President Trump’s displeasure about the Fed raising rates which he sees as standing in the way of meaningfully faster U.S. growth. Meanwhile, the prospect of higher lending rates north of the border has been a source of strength for the Canadian dollar. A parade of bullish Canadian data of late has lowered the bar for a rate hike from 1.50% as soon as September.

 

 

August 20, 2018 (Western Union Business Solutions) – An events-laden week started on a weak note for the greenback which ticked lower, but still keeping within reach of last week’s mid-2017 highs. The dollar eked out declines versus most of its top peers like the euro, yen and Canadian dollar. The market for now is giving the benefit of the doubt to U.S.-China trade talks that are set to resume in Washington starting Wednesday. The market is hopeful that the U.S.-China talks might be a stepping stone to an eventual breakthrough in trade relations between the world’s biggest economies. Central banks will take center stage Thursday through the weekend when the Federal Reserve hosts its annual symposium in Jackson Hole, Wyo. The Fed’s late summer summit could hint at the outlook for U.S. monetary policy, a key driver of the dollar’s months-long uptrend. The precarious shape of finances in Turkey and Italy remain in the spotlight, keeping underlying sentiment shaky and the greenback mostly in vogue.

Euro struggles to hold a gain

 

The euro followed the path of least resistance lower as Turkey continued to dominate the spotlight. The big source of downside risk for the euro is the degree to which European banks are exposed to Turkish assets. Meanwhile, elevated debt levels in Italy are another source of negativity for the euro with the coalition government in Rome expected to unveil a new budget and spending plans in the months ahead. Europe’s economic calendar features preliminary PMI surveys from top economy Germany on Thursday followed by revised German Q2 growth on Friday.

 

Sterling keeps above 14-month trough

 

Sterling was mostly flat at the outset of a new week with upside still restrained by uncertainty over whether Britain will reach a deal on trade with the EU before its departure from the bloc in March. Sterling currently finds itself perched a bit above 14-month lows hit last week, helped at the margin by an encouraging set of U.K. numbers last week on unemployment, inflation and retail spending that supported the narrative of gradual rate hikes across the pond.

 

Loonie pares Friday rally

 

Canada’s dollar favored its back foot after a data-inspired rally Friday. Oil prices wavered to begin the week, last down 0.3% to below $66. The loonie enjoyed a bit of a knee-jerk bounce Friday after headline inflation proved the strongest in 7 years, up 3% in July. It’s not surprising to see the loonie surrender some of its gains given the fact that core inflation remains largely contained around the Bank of Canada’s 2% goal. Still, moves to the downside in the loonie could prove limited on the view that the BOC could raise rates for a third time this year by October.

 

Fed to make headlines, potential waves, this week

 

America’s dollar index started the week with a gain, which kept it in close range of 14-month highs hit last week. The buck should have no shortage of drivers this week with U.S.-China trade talks set to resume Wednesday after a months-long recess. The big item on the dollar’s calendar is the Fed’s late summer symposium of global central bankers that begins Thursday and runs through the weekend. Markets will be all ears for fresh policy signals from Chairman Jay Powell. A tone that plays up the strong U.S. economy and plays down overseas uncertainties like Turkey would help to keep both U.S. interest rates and the greenback biased higher.

 

 

 

By Joe Manimbo, Senior Market Analyst

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.”

 

 

 

Mar. 16, 2018 (Western Union Business Solutions) - The U.S. dollar was back on the defensive Friday after logging its first winning session in 5 days Thursday. The buck was modestly weaker versus the euro and sterling, down less than 0.2%, while it slipped more than 0.6% against the safe haven yen. The otherwise weaker greenback maintained a gain against Canada, keeping the U.S. unit near mid-2017 highs. White House woes have the dollar in the doghouse. More personnel changes are expected from the White House, keeping political uncertainty elevated. Should the president soon fire national security adviser H.R. McMaster, it would mark the loss of another moderate voice following the firing of the secretary of state, Rex Tillerson, and the resignation of chief economic adviser Gary Cohn. Other weights on the dollar include worries over U.S. trade policy and moderating economic optimism with consumer spending in a slump. Market attention remains on Washington where the Fed meets next week.

EUR

The euro strengthened on the back of the weaker greenback Friday but otherwise kept on a leash after another dovish salvo from Mario Draghi this week. The central bank president sounded the dovish alarms again by affirming that the ECB would be “patient, persistent and prudent” about paring back stimulus with inflation remaining stubbornly low. Underscoring anemic inflation, consumer prices unexpectedly got revised downward to a 1.1% increase in February, a wrong turn from the ECB’s just below 2% goal.

CAD

Canada’s dollar maintained a defensive posture after sinking to fresh 8-month lows this week. Trade friction between the U.S. and Canada has weighed, along with receding expectations for the Bank of Canada to raise interest rates in the months ahead following weaker readings on the economy. President Trump this week took exception with what he characterized as a U.S. trade deficit with Canada. The loonie has a heightened sensitivity to trade matters given Canada’s export-oriented economy.

GBP

Sterling firmed Friday, boosted by the weaker dollar and reports of progress between Britain and Brussels on granting the former a transitional deal to help smooth its exit from the 28-country bloc next year. Next week looms large for the pound with U.K. reports Tuesday on inflation and Wednesday on unemployment. If that’s not enough, retail sales and a Bank of England interest rate decision highlight Thursday trade. The BOE is not expected to raise rates but it could hint at the likelihood of action in the spring.

USD

The dollar was hit by political and economic crosswinds that had the U.S. unit on its back foot. Dollar sentiment is suffering from the perception of the White House shifting in a more hawkish direction with respect to trade that has concerns on the rise about a potential global trade war. Meanwhile, expectations for U.S. first quarter growth have moderated after data this week showed the American consumer in a three-month slump. Consequently, the Fed next week, while it’ expected to raise interest rates by 25 basis points to roughly 1.6%, might be inclined to temper any hawkish message and stop short of signaling a fourth rate hike this year.