- USD/CHF printed fresh 18-month lows before demand for US dollar kicked in.
- US Retail Sales were solid and supportive for the US dollar.
- US/Sino trade deal leaves a lot left to be desired.
USD/CHF broke to fresh lows in recent trade which was the lowest since Sep 2018. The strength in the value of the CHF had been attributed to this week’s news that the US Treasury had added Switzerland to its FX monitoring list. At the time of writing, USD/CHF is currently trading at 0.9650 within a range of 0.9652 and 0.9613.
While the US Treasury may have added Switzerland to its FX monitoring list, the Swiss Finance Ministry said in response that its reappearance should have ‘no immediate consequences’ from a domestic policy perspective.
In other news, there is a sense of ambiguity towards the phase-one deal between the US and China for which the safe haven attraction of the Swiss currency could keep it underpinned over time. Yesterday, the ‘Phase-1’ trade agreement between the US and China was finally signed but there is a lot left to be desired. There are significant pledges by China and commitments (on trade) that seem very ambitious. "Above all, we argue that this agreement has created a temporary but unstable equilibrium; the deal could still collapse," analysts at Rabobank argued.
"Whilst the damage done by the trade war so far is modest, its impact will continue to feed through as long as tariffs remain in place. Moreover, a re-acceleration of trade tensions this year remains our base scenario. This will continue to cause uncertainty and dampen economic prospects throughout the world."
US dollar gets a boost from solid Retail Sales
As for economic data, we have finally seen something relatively positive from the US economy following a string of disappointments of late. Today's Retail Sales was supportive to the US dollar leading to a bullish pin bar on the daily candlestick. Retail Sales in the United States increased by 0.3% on a monthly basis in December, bang in line with market expectation and also matched the previous month’s upwardly revised reading.
Analysts at Commerzbank noted that USD/CHF has eroded the 0.9659/47 recent low and August low to break down into new 16 month lows:
"The close below 0.9647 should be enough to reassert downside momentum and target the September 2018 low at 0.9543. We have the 0.9623 23.6% retracement from the 2015 low ahead of here."
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