Intraday Market Thoughts

EURCHF Tests 1.20, Growth Differentials Hurting EURUSD

by Patrik Urban
Apr 5, 2012 13:03

Swiss CPI and SNB reserves rose; EURCHF 1.20 floor hit; UK manufacturing production fell; German industrial production declined; BOE rates unchanged. Jobless claims, Canadian labor market data and Ivey PMI is next. For the latest on Wednesdays Premium trades, see below.

The buck trades stronger across the board except JPY. European equities are losing about 1% and the relative strength winner is JPY followed by USD.

Swiss CPI rose in March 0.6% from previous 0.3% m/m but the annual result pushed further into the deflation territory at -1.0% from -0.9% and the foreign currency reserves rose in March to CHF 237.5 bln from upward revised CHF 227.2 bln. Despite the increase, the reserves have been relatively stable since the beginning of the year. EURCHF barely moved on the release but fell later amid widespread Euro bashing below the 1.20 floor to 1.1990 which is a 7 months low. Official interest pushed the rate back above 1.20 just a few seconds later but numerous structured products and SL orders were triggered. The SNB spokesman reiterated that the policy has not changed and the rate below 1.20 will not be accepted.

UK manufacturing production came in well below expectations as it fell 1% in February after January's lower revised -0.3% m/m (-1.4% from -0.1% y/y). This is the largest monthly decline since April 2011 and sharpest annual fall since 12/2009. A considerable increase in electricity, gas and oil sent industrial production higher by 0.4% from -0.6% m/m (-2.3% from -4% y/y).

German Industrial production dropped 1.3% in February from previous +1.6% but steady and positive companies' sentiment suggest that output could improve. Unusually cold temperatures are blamed for the fall.

BOE left its main interest rate at 0.5% and did not increase the asset purchase facility that currently stands at GBP 325 bln.

The US data is limited today to jobless claims that are due at 8:30 am ET and are seen marginally lower at 355K from previous 359K.

Canadian reports include labor market data at 8:30 and Ivey PMI at 10:00 am. The number of employed people is expected to rise in March to 11.3K from previous -2.8K but the unemployment rate is seen slightly higher at 7.5% from 7.4%. Ivey PMI is anticipated lower at 65.2 from 66.5.

GBP volatility could increase at 10:00 am ET when NIESR releases its March UK GDP estimate.

Wednesdays Premium Intermarket Insights saw our EURUSD shorts stopped out, which highlights that the difference pointed out in the stochastics in yesterdays chart may have important implications for next week. EURJPY shorts & gold longs remain unfilled. For full charts & trades on these ideas, gold and yields, please click here: access/?a=623 Non subscribers, please click here:


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