SNB Catches A Break
Ashraf Laidi | Jul 28, 2017 08:45AM ET
Four days of big gains in EUR/CHF have led to a breakout in the pair as markets flash mixed signals on volatility. USD finally bounced Thursday and was the top performer while CHF lagged. US Q2 GDP is due next.
On Thursday, EUR/CHF traded at the best levels since the Swiss National Bank pulled the plug on the 1.20 floor. The pair climbed above 1.1200 in a three day move that's now exceeded 200 pips. In the bigger scheme of things, it's a vocal sign of abating Eurozone worries, in contrast to Draghi's cautious between-the-lines message as the ECB sends subtle hawkish signals.
On Wednesday, minutes before the FOMC headlines hit the wires, the ECB's Nowotny said it's time to reconsider policy because the risk of deflation is gone. He also said it was time to discuss the technical aspects of the end of QE, a subject that is often taboo.
Despite the tentative public statements, a hawkish shift from the ECB is months away at most. It's a different story for the SNB where a shift is a distant prospect. If the global growth story can continue, CHF remains an attractive funding vehicle for carry trades, which should keep it under pressure.
A continued rise in global growth, however, is no guarantee. Markets briefly hit a round of risk aversion on Thursday NY Lunchtime as the volatility whip hit again in the aftermath of choppy moves in the bond market earlier this week.
Economic data helped to lift the US dollar as several second-tier data points pointed to the potential for an upside surprise in today's first look at Q2 GDP, expected at 2.7% from 1.4%. Personal Consumption Expenditure seen at 2.8% from 1.1%. Several banks raised forecasts by 0.3-0.4 percentage points. That kind of beat would be an opportunity for a further bounce in the dollar. Take note that the advanced GDP figures are incomplete and are subject to 2 subsequent revisions.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.