USD/CHF remains in positive territory despite mixed risk profile in markets

Trade activity has become more volatile over the last six months as trade tensions took centre stage, but overall, activity has continued to improve despite a strong Swiss franc although it will be interesting to see how trade tensions impact the region while, for now, the trade surplus is continuing to narrow due to the faster increase in imports. Exports were rising 1.1% m/m (nominal, seasonally adjusted) to CHF 18.9 billion, thanks to a bounce back in demand from Asian countries (+9.3% m/m).

US/China trade wars offer safe havens a boost

Elsewhere, all eyes on Sino / US trade. A memorandum of understanding remains the key aim that both countries want but  US Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin and other senior officials are playing hard ball on Beijing. 

Here are the key points, courtesy of Reuters:

• Chinese Foreign Ministry spokesman Geng Shuang told a briefing on Wednesday that working out disagreements over trade was a "process of negotiation" and that China was not "avoiding problems".
• The Chinese reversal may give China hawks in the Trump administration, including Lighthizer, an opening to take a harder stance.
• Trump's tweets left no room for backing down, and Lighthizer made it clear that, despite continuing talks, "come Friday, there will be tariffs in place."
• The administration said the latest tariff escalation would take effect at 12:01 a.m. Friday (0401 GMT), hiking levees on Chinese products such as internet modems and routers, printed circuit boards, vacuum cleaners and furniture.

Meanwhile China's Vice Premier Liu He is scheduled to arrive in the States this week and risk hopes that a 60-day postponement of US tariffs of 25% on USD 200 billion of US imports from China will be agreed if all goes well,  giving  sufficient time to develop a detailed roadmap including key deadlines for resolving remaining issues (i.e. technology transfer and industrial subsidies). In such an outcome, safe havens such as the Swissy could get a knock. 

The next big data event ahead is US CPI

"We look for headline CPI to pick up two tenths to 2.1% in April on the back of a strong 0.4% monthly increase. The main driver behind the gain is another sizable jump in gasoline prices (+10.2%). We anticipate core CPI inflation to register another 0.2% m/m gain (2.1% y/y), as a firm increase in core services prices will likely offset another decline in core goods prices,"

analysts at TD Securities explained.

USD/CHF levels

USD/CHF is holding tight within bullish territory above the April 18th high at 1.0159.

Analysts at Commerzbank explained that above 1.0240 lies the 1.0295/January 2015 high and the 1.0343 December 2016 peak:

"This represents a very tough resistance band for the market – this has provoked failure for 5 years. We note the 13 count on the weekly chart and would expect the resistance to hold again. We saw two rejections from just ahead of 1.0215 at the end of last week and our attention is on the downside. There is scope for the 55 day ma at 1.0056. This guards the 200-day ma at 0.9945."