(02 September 2019) DAILY MARKET BRIEF 2：Swissie easing as the US is closed

 


Markets appear muted as the US enjoys its Labor Day extended weekend. Indeed, the implementation of tariffs by both major economies definitely appears to be ignored by financial markets, which are trading in positive territory. On the FX side, safe-haven currencies finally have a moment of respite, with the Swissie declining from mid-August high. Yet the recent lull is expected to be short-sighted as US – China trade talks, Fed and ECB should play a major role in upcoming currency trends. The recent data release of manufacturing PMI and retail sales provide some comfort, confirming that the Swiss economy stays robust, albeit the situation for SMEs remains worrisome.

The release of July retail sales, given at 1.40% (prior: 0.70%), highest since October 2018 along with August Manufacturing Purchasing Managers Index standing at 47.2 (prior: 44.7), although maintained in contraction territory for the fifth consecutive time, seem to confirm a recovery phase in the Swiss economy at first sight. Yet the Raiffeisen SME PMI indicator appears to signal the exact opposite, with the gauge marking at 49.8 in August (prior: 53.3), the first time since July 2018 as most SMEs confirm that a stronger Swiss Franc as well as uncertainties surrounding the world economy remain alarming. The underlying index of backlogs points at 49.3 (prior: 55.4), its worst level since inception of the indicator while production stays flat, a poor release that underlines a negative outlook for SMEs. Under current circumstances, haven CHF is expected to remain tilted to the downside short-term amid today’s US Labor Day while coming events of should change the direction strongly.

By Vincent Mivelaz