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FOREX: Swiss Franc Soars After IMF Calls for SNB Rate Hike, US Dollar Sold

By , Currency Strategist
27 May 2011 07:31 GMT

Overnight Headlines

  • US Dollar Slumps on Soft GDP Release, Stocks Advance Across Asian Bourses
  • Swiss Franc Scores Momentum-Driven Rally After IMF Calls for SNB Rate Hike

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.4127

1.4336

GBPUSD

1.6327

1.6498

The Euro and the British Pound rose as much as 0.9 and 0.3 percent respectively against the US Dollar in overnight trade, capitalizing on a broad-based selloff in the benchmark currency (see below). We remain long USDJPY and continue to look for EURUSD selling opportunities.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:01

GBP

GfK Consumer Confidence Survey (MAY)

-21

-31

-31

23:30

JPY

Tokyo CPI (YoY) (MAY)

-0.1%

0.1%

-0.1%

23:30

JPY

Tokyo CPI Ex-Fresh Food (YoY) (MAY)

0.1%

0.2%

0.2%

23:30

JPY

Tokyo CPI Ex Food, Energy (YoY) (MAY)

-0.1%

0.1%

-0.1%

23:30

JPY

National CPI (YoY) (APR)

0.3%

0.3%

0.0%

23:30

JPY

National CPI Ex-Fresh Food (YoY) (APR)

0.6%

0.6%

-0.1%

23:30

JPY

National CPI Ex Food, Energy (YoY) (APR)

-0.1%

-0.1%

-0.7%

23:50

JPY

Retail Trade s.a. (MoM) (APR)

4.1%

2.6%

-7.6% (R+)

23:50

JPY

Large Retailers' Sales (APR)

-1.9%

-1.3%

-7.5% (R+)

23:50

JPY

Retail Trade (YoY) (APR)

-4.8%

-6.2%

-8.3% (R+)

1:35

CNY

MNI Business Condition Survey (MAY)

61.22

-

69.28

2:00

CNY

Industrial Profits (YTD) (YoY) (APR)

29.7%

-

32.0%

The US Dollar came under heavy selling pressure overnight, down as much as 0.7 percent on average against its top counterparts, with Asian traders picking up where North American markets left off to price in the disappointing set of revised first-quarter GDP figures. The second consecutive up day across the region’s stock exchanges compounded downward pressure, sapping safe-haven demand for the greenback. The MSCI Asia Pacific index added 0.7 percent following better-than-expected earnings results from companies including Lenovo and Gome, China’s largest computer manufacturer and its second-largest electronics retailer, respectively.

The Swiss Franc outperformed, soaring as much as 0.8 percent against the majors. The sharp, one-sided move didn’t seem to follow any clear-cut catalyst. Rather, the advance was likely momentum-driven, with traders piling into the mountain nation’s currency after it hit a record high of 1.2203 against the Euro – its most closely-monitored pairing – in New York hours. That move had been driven by an IMF report arguing the Swiss National Bank should start raising rates “in the near term”, saying the current policy setting is “unsustainable” and suggesting the strong Franc is unlikely to significantly curb inflation amid a “strong [economic] expansion”.

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

-

EUR

German CPI - EU Harmonised (MoM) (MAY P)

0.1%

0.3%

Medium

-

EUR

German CPI - EU Harmonised (YoY) (MAY P)

2.7%

2.7%

High

-

EUR

German Consumer Price Index (MoM) (MAY P)

0.0%

0.2%

Medium

-

EUR

German Consumer Price Index (YoY) (MAY P)

2.3%

2.4%

High

6:00

GBP

Nationwide House Prices s.a. (MoM) (MAY)

0.1%

-0.2%

Low

6:00

GBP

Nationwide House Prices n.s.a. (YoY) (MAY)

-1.7%

-1.3%

Low

8:00

EUR

Euro-Zone M3 s.a. (3M) (APR)

2.3%

2.0%

Low

8:00

EUR

Euro-Zone M3 s.a. (YoY) (APR)

2.4%

2.3%

Low

8:00

EUR

Italian Hourly Wages (MoM) (APR)

0.2%

0.2%

Low

8:00

EUR

Italian Hourly Wages (YoY) (APR)

2.0%

2.0%

Low

9:00

EUR

Euro-Zone Economic Confidence (MAY)

105.7

106.2

Medium

9:00

EUR

Euro-Zone Business Climate Indicator (MAY)

1.2

1.28

Low

9:00

EUR

Euro-Zone Consumer Confidence (MAY F)

-

-9.7

Low

9:00

EUR

Euro-Zone Industrial Confidence (MAY)

5.3

5.8

Low

9:00

EUR

Euro-Zone Services Confidence (MAY)

10

10.4

Low

9:30

CHF

KOF Swiss Leading Indicator (MAY)

2.22

2.29

Low

PreliminaryGerman Consumer Price Index figures headline the European calendar, with expectations calling for the annual inflation rate to pull back a bit to 2.3 percent in May. The release will do no favors for the already sliding ECB rate hike outlook. Indeed, a Credit Suisse gauge tracking investors’ priced-in expectations for tightening over the next 12 months hit the lowest in four months.

However, the reports’ implications for the Euro may be limited considering policy expectation have largely faded as a driving catalyst of near-term price action, with the single currency falling in with broad-based risk appetite trends (as tracked by the S&P 500). With that in mind, futures tracking the US benchmark stock index are little changed, with a slow trade likely into the end of the week as traders wind down ahead of the long Memorial Day holiday weekend in the US that will see exchanges closed on Monday.

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27 May 2011 07:31 GMT