Rumors of SNB intervention Vs. Euro zone’s economic struggle
From economic calendar point of view it was an interesting day yesterday however volatility expectations did not quite meet the expectations.
During the day the EUR/USD traded above 1.2500, however the pair found its new resistance level at 1.2570. From the beginning of November the pair has tested this level several times and bounced off. The technical analysis is also sustained by the fundamental environment. On Thursday the Flash PMIs were published for France, Germany and EU. The Manufacturing sector had a significant drop in the European Union. France reported its Flash Manufacturing PMI under 50.0 level, meanwhile Germany’s PMI data was published at the 50.0 limit while the Euro Area its Manufacturing PMI data was released at 50.4, above Europe’s manufacture heart Germany but still lower than the previous expectations.
Not only the manufacturing sector is under pressure, but also services. French Services PMI was released at 48.8, in line with its forecast, German Services PMI was released with 2.1 points over the 50 limit, but with 2.4 points below estimates, and the Euro Area reported its Services PMI at 51.3, lower than the previous expectations as well.
On the other side of the ocean, the US reported a bigger number of unemployment claims for the last week, but close to the market expectations. Even with this slight rise, the general direction of the trend is up for the labor market in US. This was the only bad news from the American market for yesterday. The CPI data was published with no change (0.0%) which is better than what investors were expecting (a drop of 0.1%). The Philly Fed Manufacturing Index was surprisingly published at 40.8, while its forecast was no more than 18.9.
Meanwhile Euro with the Swiss franc is getting closer to 1.20 barrier. Last night UBS said that the EUR/CHF floor will be defended with “utmost determination”. This means that the Swiss Central Bank is ready to pump in some cash to keep 1.20 in place. They should do this fast, because if the price will be pushed lower, lots of stops will be activated and they could lose control over the situation. From price action point of view we can assume that the SNB might have started to purchase EURCHF to defend the 1.20 EURCHF floor.
In UK, Retail Sales rose above their 0.7% growth estimation and reached 1.8% growth. This came in handy for GBP fans because the cable managed to remain in an uptrend on a daily basis against its major counterparts. GBP/USD was pushed yesterday above 1.57, however the momentum was not sustainable and the pair once again tumbled below the 1.57 levels.
Today there are a number of important speeches planned:
- 8:00 am GMT ECB President Draghi Speaks
- 10:15 am GMT German Buba President Weidmann Speaks
- The title of the speech is “Banking Union and Regulatory Reforms: Mission Accomplished?”. Investors will look for any significant commentary regarding ECB’s €1 Trillion balance sheet plan from Europe’s largest economy point of view.
- 7:45 pm GMT MPC Member Miles Speaks
- Investors will look for any comment on conservative UKIP’s Reckless winning Rochester and Strood seat
The volatility of the market could be low because of the lack of economic indicators.
For the weekend, most of the attention will also be on the Iran’s nuclear negotiations in Vienna as the 24 November deadline is getting closer. If all parties come to an agreement we may expect a massive volatility in Oil prices on Monday.
