Swiss Franc Spikes Higher After Quarterly Monetary Policy Review

June 17, 2010

The Swissy advanced 1.5% against the dollar and to a new high for the move of 1.375 per euro.  The U.S. dollar also lost 0.5% against the euro, 0.4% versus the New Zealand dollar and sterling, and 0.2% relative to the Aussie dollar and yen.  Against the Canadian dollar, the greenback edged up 0.1%.

Stocks were mixed in the Pacific Rim but are up in Europe.  They closed off 0.7% in Japan, Australia, and New Zealand and lost 0.6% in China, but Indonesia, India, Taiwan and Hong Kong saw gains of 1.1%, 0.9%, 0.8% and 0.4%.  Stocks in Spain, France, Britain and Germany are trading up by 1.3%, 0.9%, 0.8%, and 0.6%.

Bond yields were generally steady in Japan and Europe.

Gold firmed 0.5% to $1239.00 per ounce.  In contrast, oil slid 0.4% to $77.38 per barrel.

The Swiss National Bank declared the deflationary risk has disappeared largely and projects growth in 2010 of about 2%.  The key 3-month Libor interest rate target of 0.25% within a 0.0-0.75% corridor was retained as expected, and officials indicated a readiness to intervene if renewed deflation threatened.  They noted an eventual need to raise interest rates but gave no sense of urgency to starting that normalization, especially amid greater uncertainty than in March.

Spain will publish results of bank stress tests.  The Economics Minister of Spain hinted about a need for aid to some banks.

Bank of England Governor King gave his annual Mansion House speech on monetary policy.  His remarks had a conservative tone, promising to raise rates as growth returns and observing some upside price risks.  Rates will begin to rise before quantitative easing starts to get reversed.

British retail sales rose 0.6% in volume terms last month.  Analysts expected a smaller increase.  Sales in March-May were 1.0% greater than in December-February and 1.7% above their year-earlier level.  Non-food retail sales in May were 5.4% higher than in May 2009.

The British business group, CBI, published a disappointing monthly manufacturing survey, whose main index fell to a 3-month low of minus 23 in June from minus 18 in May.  Export orders printed in negative territory (minus 2) for the first time since the end of last year.

Construction output in Euroland retreated 0.3% in April.  Such had dived by 2.0% in January and a further 6.5% in February before rebounding 6.5% in March.  Output in 1Q10 was 4.1% lower than in the final quarter of 2009.  In April, such was 6.1% less than in April 2009.

Japan’s index of leading economic indicators dipped two-tenths to 101.7, the first drop in 14 months.  Such was still well above the cyclical low of 73.8 in February 2009 and produced a high diffusion index of 90.9.  The coincident indicators index continued to incline with a reading of 101.3 after 100.5 in March and 96.5 at end-2009.

Monthly estimates of the BOJ Tankan were released by Reuters that show increases in June of 5 points for manufacturers to +9 and 7 points for non-manufacturers to minus 8.  Additional improvement of five and 13 points, respectively, is predicted for those measures over the coming three months.

Hong Kong unemployment of 4.6% in May was somewhat greater than anticipated.

Greek unemployment rose six-tenths to 11.7% last quarter.  Dutch joblessness remained at 5.6% in May.  The ZEW consumer confidence index for Euroland fell by nearly fifteen points this month to a reading of 20.4.  The monthly Bulletin of the ECB, as usual, rehashed the gist of Trichet’s press conference remarks earlier this month.  Plans to unwind liquidity support have stalled.  Swiss industrial output in 1Q10 was 5.3% greater than a year earlier, a somewhat smaller on-year advance than expected.

The United States releases quarterly current account data, monthly consumer prices and weekly jobless insurance claims figures today.  Canadian wholesale turnover will be reported, and Turkey’s central bank will announce its latest interest rate decision (likely to opt for the status quo).

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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