Swiss Franc Edges Down Against Majors
Wednesday, the Swiss franc declined to a 5-day low versus the European currency and a 2-day low against the British pound. The franc also slipped from Asian session’s new multi-day highs against the US dollar and the Japanese yen.
The Swiss franc that reached a 13-day high of 1.0635 against the US dollar at 2:45 am ET Wednesday weakened thereafter. The franc thus slipped to 1.0729 against the greenback at 7:05 am ET, compared to 1.0670 hit late New York Tuesday. The next downside target level for the Swiss currency is seen around 1.090.
The franc reached a 6-day high of 1.5015 against the European currency during today’s early Asian deals. The franc reversed its direction thereafter and made a sharp fall at 6:40 am ET Wednesday. Currently, the franc is trading at a 5-day low of 1.5119. If the Swiss currency falls further, it may likely target the 1.515 level.
In economic news from Europe, the Euro-zone current account balance on a seasonally adjusted basis showed a deficit of EUR 5.9 billion in April, smaller than the EUR 7 billion deficit registered in March. At the same time, on an unadjusted basis, the current account deficit widened to EUR 9.2 billion in April from EUR 4 billion in March.
Another report showed that retail sales in Italy dropped 0.4% month-on-month in April, after rising 0.1% in the preceding month. Economists expected sales to be flat. Year-on-year, retail sales dropped 0.6% in April compared to a 5.2% fall in March, and also slower than economists’ expectation of a 2.8% decline.
Consumer confidence in Italy rose to its highest level since December 2007, economic think thank ISAE said today. The gauge for households’ confidence about the economy rose to 105.4 in June from a revised 104.9 in May. That was an unexpected increase because economists’ had predicted the reading to fall slightly to 104.7.
Against the British currency, the Swiss franc extended its Asian session’s downtrend during early European deals on Wednesday. At 6:50 am ET, the franc touched a 2-day low of 1.7786 against the pound, compared to Tuesday’s closing value of 1.7561. On the downside, 1.784 is seen as the next target level for the Swiss currency.
At 7:00 am ET, the Swiss currency declined to 88.61 against the Japanese yen, moving from an Asian session’s new multi-day high of 89.86. If the pair falls further, 87.8 is seen as the next target level. The pair closed Tuesday’s New York deals at 89.29.
The yen tumbled in Asian deals after reports showed that Japan’s trade surplus declined and the nation’s corporate service prices fell at a record pace in the month of May, casting doubt on the nation’s growth prospects as the economy struggles to emerge from its worst postwar recession.
Japan’s Finance Ministry said that Japan posted a trade surplus of 299.8 billion yen, a decrease of 12.% on year. Most experts has forecast a surplus of 214.6 billion yen.
Exports in May fell 40.9% from a year earlier, the eighth straight month of decline, on weak overseas demand for cars, steel and electronic parts, the data showed. Imports dropped 42.4% in May, marking the seventh straight month of decrease.
The corporate services price index in Japan plunged 3% year on year to 92.4 in May, the sharpest decline since the data began to be compiled in 1985, the Bank of Japan said today.
Traders are now likely to focus on the North American session, in which the U.S., Commerce Department is set to release its durable goods orders report at 8:30 am ET. Economists look forward to a 0.9% decline in durable goods orders for May.
The Commerce Department is also due to release its new home sales report for May at 10 am ET. The consensus estimate calls for an increase in new homes sales to 360,000.
The Federal Reserve Open Market Committee began its two-day policy meeting yesterday and will make an announcement at 2:15 pm ET today. The U.S. central bank is widely expected to keep interest rates on hold at a record low and keep its planned debt purchases unchanged.
At its April meeting, the Fed maintained its key fed funds target rate unchanged at a range of 0%-0.25%. The FOMC noted that the economy continued to contract, with the pace of contraction slowing somewhat. Despite the stabilization in consumer spending, the committee noted that spending continued to be constrained by job losses, lower housing wealth and tight credit.
