Concerns over the scope of a global recovery weigh the Swiss Franc against the dollar as safe haven flows lead to broader greenback support. The USD/CHF rose to its highest level since early September as the pair also saw a sharp rise to end the week on the expected intervention. The FOMC remain committed to keeping rate low for an “extended period” which is maintaining the dollar as a funding currency. However, the robust 4Q U.S. GDP figures could start to raise the yield outlook which should begin to alter the pair’s correlation with risk.
The economic calendar may offer some event risk with the SVME-PMI and December trade balance report. Any signs that demand from abroad is wavering could weigh on the Swiss franc. Economists are expecting an improvement manufacturing following last month’s first decline. Backlog of orders declined as manufacturers caught up with demand, but with inventory levels nearly rebuilt, there could be a drop in activity. However, risk sentiment will most likely be the main driver of price action on the week, unless we see the threat of intervention spur bearish Franc sentiment.- JR
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