Swiss full-employment boosts CHFBy Vincent-Frédéric Mivelaz
The jobless rate is 2.40% in June (seasonally adjusted: 2.60%), a level not seen since September 2008. Switzerland remains in full employment, despite a slowdown in inflation and a reduction of domestic consumption in May. With exports flat, imports up 3.10% in May and business sentiment slightly positive, the Swiss economy remains on track of current growth expectations at 2% for 2018. Currently at 0.9868 and unable to break hourly resistance at 0.9909, the USD/CHF pair is expected to decrease further, approaching the 0.9860 range.
Brexit muddle downs poundBy Vincent-Frédéric Mivelaz
Soft or hard Brexit? Nobody knows, not even the UK Cabinet, and now Brexit Minister David Davis has resigned, calling the latest Government proposals “weak and impracticable”. Those proposals try to defy a hard Brexit and aim for a softer Brexit, in which the UK would remain in the customs union with the EU for goods (but not services). GBP/USD is bouncing off the news. Currently at 1.3345, the pair is rising toward 1.3370 (its high of 13 June).
USD loses ground on wage growthBy Arnaud Masset
The dollar lost ground Monday on mixed economic data and escalating trade tensions. Investors reacted strongly to the last job report: despite the addition of more private jobs than expected (213,000 versus 195,000 expected), the dollar fell sharply. Unemployment ticked up to 4% (from 3.8% in May) amid increased numbers of job seekers, but wage growth is the missing piece of the full employment puzzle. Average weekly earnings increased only 2.7% (versus 2.8% expected), so inflation adjusted wage growth would stall if not contract in June (headline inflation rose 2.8% annually in May and is expected to have increased 2.9% in June – thanks to rising oil prices).
Investors adjusted their rate hike expectations to the downside. According to the Overnight Index Swap, the probability of a September rate hike has eased to 73%, from 84% a couple of days ago. Equities reacted positively to the perspective of a less abrupt rate path in the US.
EUR/USD rose 0.22% to 1.1775, the Aussie reached $0.7465 (up 0.50% on the session), while USD/CHF fell 0.22% to 0.9872. The trade war will prevent a massive USD sell-off as investors will maintain caution.