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Switzerland: GDP forecast’s reduced
Switzerland’s government lowered its economic-growth forecasts for 2011 and 2012 from 2.1% and 1.5% to 1.9% and 0.9% respectively. Export growth estimate was trimmed from 4.6% this year and 3% the next to 3.2% and 0.7% respectively.
The reason for this downward revision is the fact Swiss franc’s rate is still excessively strong even after the Swiss National Bank has set the ceiling for the nation currency’s rate versus euro. According to the data released today, the nation’s exports fell in August by 7%.
The nation’s authorities say that isolated quarters of economic contraction are possible, though deep recession seems to be unlikely.
Commerzbank: USD/CHF is gaining on the SNB talk
The greenback went up versus Swiss franc from the day’s minimum at 0.8692 getting above 0.8940 on the speculation that the Swiss National Bank has imposed a tighter peg for the national currency. There’s talk that the SNB has removed the EUR/CHF target up to 1.25 per euro. The central bank didn’t confirm the information, but franc is experiencing general weakness.
Technical analysts at Commerzbank note that USD/CHF has broken up important resistance at 0.8850/0.8950 (double Fibonacci retracement, 200-day MA and May minimum). In their view, US dollar is on its way up to 0.9103 (55-week MA) and 0.9340/0.9400 (March maximums and double Fibonacci retracement).
According to the bank, support for the pair is found at 0.8640/0.8462 (23.6%/38.2% retracement of dollar’s advance in September).
BarCap: ECB will cut rates in October
The International Monetary Fund claimed that the European Central Bank should lower its benchmark interest rate from the current 1.5% level if the euro zone’s economic growth remains at risk.
Analysts at Barclays Capital expect the ECB to reduce the borrowing costs by 25 basis points the next month to 1.25% and to widen the interest rate “corridor” back to +/-100 basis points which would make the deposit facility decrease by 50 basis points to 0.25%. Taking into account the excess bank reserves, that would let the EONIA (overnight) rate to trade significantly lower.
According to the bank, things remain like that until there’s need for policy normalization. The specialists believe that it may happen in the second half of 2013.
Westpac: commodity currencies are seen declining
Analysts at Westpac note that the ongoing euro zone’s debt crisis is seriously hurting investors’ risk sentiment bringing their attention to Greece and Italy. In their view, the risky currencies currently seem to be very vulnerable.
The specialists recommend selling commodity currencies. In particular, the bank prefers shorts on Australian dollar versus its US counterpart targeting 1.0000 and stopping above 1.0335.
Credit Agricole: pound’s declining after MPC minutes
British pound fell to the 8-month minimum versus the greenback at $1.5612.
It happened after the Bank of England’s Monetary Policy Committee’s September meeting minutes showed that the policymakers are regarding the possibility of embarking on additional monetary stimulus.
The MPC members point out that UK GDP growth in the second half of 2011 may be significantly weaker than it was thought last month.
Analysts at Commerzbank note that the central bank has made it clear that if the situation worsens, it’s going to ease it policy. In their view, Britain’s economic prospects are very uncertain and the nation is vulnerable to substantial downside risks.
The officials voted 8-1 to maintain the current size of the asset purchase program and were unanimous in keeping the benchmark rate at the record minimum of 0.5%.
Currency strategists at Credit Agricole claim that sterling will go down to test $1.55. In their view, the currency will remain under pressure during the next few weeks as the as market shifts expectations for a UK QE2 to the November meeting.
Analysts at Morgan Stanley keep being bearish on GBP/USD expecting the pair to fall to $1.53 by the end of the year and to $1.51 at the beginning of the next year.
IMF lowered economic forecasts
The International Monetary Fund lowered US economic growth forecast for 2011 and 2012 from 2.5% and 2.7% (June’s estimate) to 1.5% and 1.8%. The outlook for the euro area was reduced from 2% this year and 1.7% the next to 1.6% and 1.1% respectively. The world’s GDP will increase by 4% as in 2011, as in 2012 versus 4.3% and 4.5% advance seen earlier.
According to the organization, global economy is entering a “dangerous new phase” and the policymakers are to act decisively reducing deficits in order to improve prospects and reduce risks.
Bank of Canada isn’t concerned about inflation
According to the data released today, annual Canadian CPI growth speeded up from 2.7% in July to 3.1% in August, while the economists were looking forward to only 2.9% increase.
Bank of Canada Governor Mark Carney said yesterday that the central bank may keep the borrowing costs low until full output is restored. According to Carney, Canada’s recovery will be affected by economic weakness of the United States, its biggest trade partner.
The head of the central bank didn’t express any concerns about inflation. Analysts at TD Bank believe that August burst of inflation will prove to be only temporary.
Canadian GDP contracted by 0.4% in the second quarter. The IMF lowered yesterday the nation’s 2011 economic growth forecast from 2.9%, according to June’s estimate, to 2.1%.
Canadian dollar is weakening versus its American counterpart for the third day in a row on the declining oil price. The pair USD/CAD rose from Monday minimum at 0.9778 approaching the parity level.
Commerzbank: technical comments on USD/CAD
US dollar rebounded this week versus its Canadian counterpart using support provided by the 200-day MA at 0.9777 reaching the parity level.
Technical analysts at Commerzbank note, however, that USD/CAD’s advance will be limited by resistance in the 1.0000/58 zone. According to the specialists, this area contains 50% retracement of the decline in 2010/2011 and January maximum. If the greenback eventually manages to overcome 1.0058 and close above this level in New York for 2 times, it will be able to rise to 1.0109/1.0139.
The bank says that support for the pair is found at 0.9742/26 (55-day MA and late August minimum).
UBS: bullish outlook for EUR/CHF
Analysts at UBS are bullish on the single currency versus Swiss franc.
In their view, the outlook for EUR/CHF has become positive as the pair broke yesterday above resistance at 1.2191.
The specialists expect euro to rise to 1.2346 and then to 1.2469. Support for the European currency lies at 1.2051.
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