MARKET DEVELOPMENT –Swiss Franc Rises Despite SNB Intervention, US Yield Curve Nears Inversion
GBP: UK jobs report was broadly positive with wage data hovering around decade highs, while the employment change printed better than analyst forecasts. While the unemployment rate ticked up marginally, the figure is still relatively robust. However, the data had limited impact on the Pound, given that Brexit uncertainty continues to dictate price action, alongside the monetary policy outlook. As such, gains in the Pound remain shallow at best.
CHF: The Swiss Franc outperforms across the G10 complex with risk off flows continue to support. USDCHF now trading at the lowest level since September 2018, having broken the double at 0.9690-95. Latest sight deposits continue to show that the SNB have intervened in FX markets to stem the appreciation in the Swiss Franc which trades at a 2yr high against the Euro. However, with risk off flows underpinning the CHF and expectations of ECB stimulus keeping the Euro on the backfoot. Risks remain tilted for further CHF gains, particularly against the Euro.
EUR: ZEW survey readings provided yet another reminder that the Eurozone is in need of ECB stimulus. The German economic sentiment had plunged to the lowest level since December 2011 with ZEW citing the recent escalation and rising no-deal Brexit risks as key factors behind the weak reading. However, the Euro had largely been unchanged following the release, given that the weak survey is not all to surprising in light of the growing concerns surrounding the global economy. Elsewhere, the Euro later pulled back from best levels following the higher than expected US CPI report, in which the yearly rate rose 1.8%, above expectations of 1.7%. Although, this is unlikely to alter Fed policy going forward with focus on the trade war tensions placing a greater weight to the central banks thinking. Expectations are for the Fed to ease again at the September meeting. Eyes will also be on the US 2s10s yield curve which continues to edge closer towards inversion at 3.5bps last.
Source: DailyFX, Thomson Reuters
WHAT’S DRIVING MARKETS TODAY
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--- Written by Justin McQueen, Market Analyst
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