Swiss Mess

Robust US retail sales led to a broad USD bid on Thursday, but FX is pulling back ahead of the weekend, with the exception for the Swiss franc, which is the weakest currency of the past week and month. CHF hit its lowest against JPY and USD in 5 and 3 mth respectively. EURCHF especially rose on a leaked ECB report (more below). The UMich consumer sentiment survey is due up next. Don't forget it's the quarterly “triple witching” rendez-vous --the simultaenous expiration of stock and index options and futures on indexes. We could see surging volatility towards the final hour of trade. 

There have been abundant signs of SNB intervention recently and technical momentum could soon add to the moves. USD/CHF took out the June high early today and if it can hold above into the weekend, that leaves nearly 200 pips of open air until the 2021 high of 0.9471.

EUR/CHF also rose to a two-month high on Thursday. That pair had some help from a report saying the ECB's unpublished forecasts show inflation hitting 2% sooner than most economists expect. EURCHF could potentially hit its next iterim target at 1.10 after breaking the March trendline resistance. 

US August retail sales rose 0.7% compared to -0.8% expected.  The ex-autos and control group readings were equally strong, though all of them were tempered by negative revisions to the July numbers. Even with that, it was a roundly impressive report that led to a rally in the US dollar.

Especially instructive was the much different FX market response to this report compared to CPI earlier in the week.  That report – which is a key Fed and market focus at the moment – was soft and yet the dollar held up relatively well.

Markets are choppy at the moment but there is some optimism about the reopening after US retail sales. We will get another look at spending with the UMich consumer sentiment report for September at 1400 GMT. The consensus is a slight improvement to 72.2 from 70.3.