Forex - USD/CHF weekly outlook: December 12 - 16

Investing.com - The U.S. dollar slipped against the Swiss franc on Friday, trimming some of the week’s gains as an announced agreement on deeper economic integration in the euro zone only moderately reassured markets on the handling of the region’s debt crisis.

USD/CHF hit 0.9295 on Tuesday, the pair’s highest since November 28; the pair subsequently consolidated at 0.9228 on Friday, gaining 0.25% over the week.

The pair is likely to find support at 0.9070, the low of December 1 and resistance at 0.9329, the high of November 25.

European leaders agreed to increase the financial backstops to countries with debt problems by channeling EUR200 billion of funds to the International Monetary Fund. However, they postponed decision on increasing the capacity of the European Stability Mechanism until March.

U.K. Prime Minister David Cameron vetoed changes to the EU treaty after failing to secure concessions, meaning new fiscal rules will have to operate as an intergovernmental agreement.

Meanwhile, investors were cautious amid uncertainty over whether the European Central Bank will now play a bigger role in stabilizing the region’s bond market.

In the U.S., official data showed that the trade deficit narrowed to USD43.5 billion
in November, in line with expectations, from a deficit of USD44.2 billion the previous month.

In a separate report, the University of Michigan said that its index of consumer sentiment rose more-than-expected to 67.7 in November, from 64.1 the previous month.

The greenback found support on Thursday after the U.S. Department of Labor said that the number of people who filed for unemployment assistance in the U.S. last week fell to the lowest level since late February, tumbling to 381,000 after a reading at 404,000 the previous week.

Earlier in the week, a report showed that Swiss consumer price inflation declined unexpectedly in November, easing for the second consecutive month, sparking speculation that the Swiss National Bank may raise its minimum exchange rate target of 1.20 per euro.

In the week ahead, investors will be keeping a close eye on the borrowing costs of troubled euro zone states, as a rise in borrowing costs could prompt a rating cut after Standard & Poor’s warned that it may carry out a mass downgrade of 15 euro zone members, including France, Italy and Spain.

Italy and Spain are both set to auction government bonds in the coming week.
Markets will also be closely watching the Federal Reserve’s policy setting meeting on Tuesday, as concerns over the impact of the euro zone’s financial crisis on global growth continue to weigh.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, December 12

Switzerland is to release government data on the employment level, an important indicator of economic health.

Also Monday, the U.S. is to publish official data on the federal budget balance.

Tuesday, December 13

Switzerland is to publish government forecasts of economic growth, including key indicators of gross domestic product such as employment and inflation.

Later Tuesday, the U.S. is to publish official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. In addition, the Federal Reserve is to announce its federal funds rate.

Wednesday, December 14

Switzerland is to release official data on produce price inflation, a leading indicator of consumer inflation. In addition, the ZEW Centre for Economic Research is to publish a report on Swiss economic expectations, a leading indicator of economic health.

The U.S. is to produce official data on import prices and crude oil stockpiles.
Also Wednesday, the Organization of Petroleum Exporting Countries are to meet to discuss a range of issues regarding energy markets, including oil production levels.

Thursday, December 15

The Swiss National Bank is to announce its benchmark interest rate; the announcement will be followed with a closely watched press conference to discuss monetary policy. Switzerland is also to release official data on industrial production.

The U.S. is to release a flurry of economic data, including the weekly report on initial jobless claims and data on producer price inflation. The U.S. is also to release official data on industrial production, capacity utilization, the current account, TIC long term purchases and manufacturing activity in New York and Philadelphia regions.

Friday, December 16

The U.S. is to round up the week with official data on consumer price inflation, which accounts for the majority of overall inflation.