Intraday Market Thoughts

Swissy Continues To Depreciate

by Patrik Urban
Aug 15, 2011 14:03

USD is mixed since London open. BoE Miles comments underpin GBP and CHF continues to weaken. Market awaits manufacturing and capital flows data.

CHF continues to be sold across the board as Reuters suggests that SNB will introduce and defend a limit on CHF strength. This news combined with the ongoing speculation that SNB will peg the Franc to the Euro sent CHF sharply lower over the past three days. EURCHF trades 300+ pips above Fridays close and USDCHF reached 0.7997 which is nearly 1000 points above lows reached on August 9th.

GBP is higher after BoE Miles said that additional asset purchases are not needed now and that monetary policy will eventually move back to normal. As a result, GBPUSD broke above recent highs and currently trades above the 1.63 level.

Any Euro strength is likely to fade as German government spokesman said that Eurobonds will not be discussed at tomorrows meeting between Merkel and Sarkozy. Any breakthrough in talks is therefore unlikely.

The New York session starts at 8:30 am ET with August Empire State Manufacturing Index that is expected to improve to 0.8 from previous -3.8. Negative prints that we saw during June and July indicate worsening conditions so print above zero would be an encouraging sign of stabilization.

At 9:00 am ET the US Treasury releases TIC data indicating capital flows. On net basis, the demand for longer term securities is expected to improve slightly to USD 30.4B from previous USD 23.6B. Over the past four months prints have stabilized in the USD 25-30B range which is still somewhat low from a historical perspective.

Last news from the US comes at 10:00 am when the NAHB releases its Housing Market Index. In August the index is expected to stay unchanged at 15 which is at the lower part of the recent range.


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