Franc support may not last long as there already concerns that the allotted amount of emergency funds won’t be enough which will leave Greece still at risk of defaulting. Additionally, focus could now shift to Portugal and Spain whose yields were already on the rise at the height of Greek concerns. The region remains in trouble and with the Swiss economy dependent on Euro-area demand; the Swiss unit could continue to be dragged lower by the single currency. Currently the economy is on firm ground as strong demand from Asia and improving U.S. consumption led to a 1.4% increase in exports in March. The increase demand from abroad pushed the trade surplus to 2.01 billion francs from 1.3 billion francs. However, struggle sin Europe has started to weigh on Swiss investor confidence which slipped to 53.4 from 53.8.
Markets will gain great insight into the domestic economy this week with the UBS consumption indicator and the KoF leading indicator. Domestic demand weakened last month and consecutive period of weakness will dim the outlook for growth. However, the KoF which measures expectations for the next three to six months is forecasted to improve for a twelfth straight month to 1.99 from 1.93.Neither release is expected to have any market moving potential as the issues in Europe will continue to dominate price action. If Friday’s weakness was indeed the beginning of a reversal then the current range has remained intact and a test of the lower bound at 1.0500 is a possibility. If the 50-Day SMA holds at 1.0678 then the USD/CHF may begin to trend sideways as markets take time to assess the implication of the Greek aid package. -JR
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