Daily FX Market Outlook by AceTrader-1-9-2011

Market Review – 31/08/2011 22:00 GMT

Franc gains broadly as government accepts strength

The Swiss franc rose against all its major counterparts on Wednesday as the Swiss National Bank has not recently signalled further intervention. Although the franc retreated as Swiss Economy Minister Johann Schneider-Ammann said it was still massively overvalued, the pair remained supportive as he also said Switzerland would have to keep living with the strong franc for some time.

Dollar swiss tumbled from Australian high at 0.8209 to as low as 0.7994 in NY morning on continued worries about the eurozone debt crisis and cross buying of franc (eur/chf tumbled from 1.1852 to 1.1527). However, the comments from the Economy minister lifted the pair to 0.8093 before stabilising.  
The single currency traded narrowly in Asia and then briefly recovered to 1.4470 in European morning due to the comments from a German government spokesman who said ‘cabinet has approved framework for draft law on expanding eurozone rescue mechanism.’ However, the pair tanked to 1.4393 after the release of better-than-expected U.S. Chicago PMI and factory orders data, price later dropped to session low at 1.4359 in NY afternoon on dollar’s broad-based strength.  
Versus the Japanese yen, the greenback declined from Australian high at 76.76 to 76.48 at NY opening before staging a brief but strong bounce to 76.84 on the strong U.S. Chicago PMI and factory orders data. However, the pair immediately fell to 76.42 before recovering due to dollar’s broad based strength.  
The British pound edged higher to 1.6330 in European morning but then fell to 1.6257 on cross selling of sterling vs euro. Although cable climbed back above 1.6330 to 1.6335 in NY morning, the pair tanked again in tandem with euro to 1.6230 ahead of NY closing.  
On the data front, German retail sales were 0.0% m/m and -1.6% y/y vs forecasts of -1.6% and -1.9% respectively whilst employment decreased only 8K vs forecast decline of 10K. The EU unemployment rate increased from 9.9% to 10.0%.  
U.S. ADP employment came in at 91K vs forecast of 110K. Chicago PMI and Factory orders of 56.5 and 2.4% exceeded expectations of 53.3 and 1.0%.  
Data to be released on Thursday include:  
New Zealand terms of trade, U.K. nationwide house prices, manufacturing PMI, China manufacturing PMI, HSBC manufacturing PMI, Australia retail sales, capital expenditure, Swiss GDP, retail sales, PMI, Germany GDP, manufacturing PMI, EU manufacturing PMI, U.S. jobless claims, productivity, labour cost, construction spending, ISM manufacturing.