Swiss franc still overvaluedBy Arnaud Masset
After testing 0.9649 last Friday, USD/CHF stabilised around 0.9595 this morning. Despite failing at breaking the key 0.9630-60 resistance area, the pair is still trading in its monthly uptrend channel. We believe that the greenback has only paused in its march upward. Upside resistance lies at 0.9766; downside at 0.9420-35.
Despite the Swissie’s strength, the Swiss labour market continued to improve in March. Unemployment beat the median forecast of 3.0% at 2.9% (3.2% in February). In forex markets, the news went mostly unnoticed as traders focused on the tariff battle between the USA and China. After Friday’s sharp moves, volatility was low on Monday morning.
Traders are still puzzled by the latest US jobs report. March nonfarm payrolls came in well below estimates at 103,000 new jobs versus 185,000 forecast, while February’s reading was revised to 326,000 from 313,000. Unemployment was 4.1%, just above the forecast of 4.0%. Since mid-March, US 2-year treasuries have yielded 2.25-2.35%, but inflation expectations have decreased significantly, down from 2% to 1.78%, as investors desperately wait for a significant increase in wage pressure. Despite sustained new hiring, wages have yet to push up significantly.
French trade deceleratesBy Vincent-Frédéric Mivelaz
Supported by lower inflation in February (consumer price index +0.20%), France’s trade remains in deficit, below its 5-year average of EUR -4.64 billion per month and slightly higher than January’s EUR -5.19 billion. Over the past 12 months, the deficit reached EUR -60.2 billion (2017: EUR -62.5 billion). Exports are stabilizing at EUR 39.7 billion (-0.90%), although they are under pressure from chemicals, electric materials and telephony, while aerospace and transportation remain strong.
We remain positive on the French economy ahead of tomorrow’s announcement of February industrial production data. The CAC 40 is robust, ending last week up 1.76% and beating European counterparts year-to-date. EUR/USD’s bearish pattern since mid-February continues (-1.87%): the pair is trading at 1.2270, headed to the 1.2265 range short-term.