Friday, the Swiss franc slumped to a fresh 2-month low against the pound as Switzerland's retail sales declined more than expected in the month of February. Additionally, Swiss National Bank's Governing Board Chairman, Jean-Pierre Roth's comments aggravated the weakness of the franc.
The franc also fell to a 1-month low against the dollar and new multi-day lows against the euro and the yen.
According to provisional results issued by the Federal Statistical Office, Swiss retail sector turnover adjusted for inflation dropped 3.8% in February over the year ago level, much larger than the expected decrease of 0.2%. Meanwhile, adjusted for working days, retail turnover grew 0.2%.
At the General Meeting of Shareholders of the SNB, Governing Board Chairman, Jean-Pierre Roth said that the central bank would continue to buy foreign currencies on the foreign exchange market to avoid further appreciation of the Swiss franc against euro and inject additional liquidity into the economy.
Roth said it will continue to pursue this strategy for as long as the risk of deflation remains in the economy and added that the currency intervention has become necessary as the rise in the franc threatened to offset the rate cuts.
Citing sharp economic deterioration and a risk of deflation, Swiss National Bank lowered the target range for the three-month Libor by 25 basis points, narrowing it to 0%-0.75% from the previous 0%-1% on March 12. The Swiss currency fell heavily on the same day as the Swiss National Bank also took other aggressive monetary easing measures that include buying foreign currencies to prevent further appreciation of the Swiss franc.
According to recent SNB estimates, the country's economy is expected to contract by between 2.5% and 3% this year. In March, the SNB predicted that consumer prices in Switzerland are set to fall by 0.5% in 2009 and inflation should hover around 0% in 2010.
Economic reports releasing from the Swiss economy are also showing signs of deterioration. The producer and import prices declined in the month of March, Switzerland's seasonally adjusted unemployment rate increased to 3.3% in March from 3.1% recorded in February, Swiss SVME Purchasing Managers' Index or PMI stagnated at a record low of 32.6 and the Swiss UBS consumption indicator continued its downward trend in February.
The Zurich-based research institute KOF said that the Swiss economy is set to shrink 2.4% in 2009. In December last year, the think tank had projected a contraction of 0.5% for this year. KOF said the recession will be deeper and longer than we expected in our assessment at the turn of 2009.
The Swiss Franc pared Friday's Asian session gains against the UK currency during early European deals. Currently, the franc is trading at a fresh 2-month low of 1.7261 against the pound, compared to yesterday's closing value of 1.7121. On the downside, the franc may likely find support near the 1.749 level.
The Swiss franc slumped to a 1-month low against the US dollar, falling to 1.1665. This may be compared to Thursday's New York session closing value of 1.1468. The next likely support for the Swiss currency is seen at the 1.183 level.
From US, the Reuters/University of Michigan's preliminary report on the consumer sentiment index for April is scheduled to be released at 10 am ET today. Consumer confidence is expected to rise in the month, with economists forecasting an increase in the index to 58.5 from 57.3 in the previous month.
At 8:30 am ET, Kansas City Federal Reserve President Thomas Hoenig is scheduled to deliver opening remarks in Washington. Bernanke is due to deliver a keynote speech at the Kansas City Federal Reserve Bank's conference on Innovative Financial Services for the Underserved at 12 pm on Friday.
Against the European currency, the franc eased after showing strength during Friday's Asian trading. The alpine currency tumbled to a 4-day low of 1.5239 by about 6:20 am ET, compared to 1.5119 hit late yesterday in New York. If the franc declines further, the next likely target level is seen at 1.524.
The franc had been in an upward channel against the euro in the beginning of this year, until hitting a new multi-month high of 1.4580 on March 06. Thereafter, the alpine currency weakened and tumbled around 4% on March 12 following SNB's intervention to avoid further appreciation of Swiss franc. On March 16, the franc slumped to a 3-month low of 1.5450.
The euro tumbled today during Asian deals as the European Central Bank President Jean-Claude Trichet said the central bank should do everything possible to restore confidence and support growth, leaving room for further interest-rate reductions.
On the economic front, Euro zone trade deficit narrowed to EUR 2 billion in February from January's revised EUR 10.9 billion deficit, the Eurostat said today. Economists had expected the deficit to contract to EUR 5 billion.
Against its Japanese counterpart, the franc edged down to a 17-day low of 85.19 by about 7:05 am ET Friday. The franc may likely test support near the 83.4 level, if it drops further. At yesterday's New York session close, the pair was quoted at 86.62.
The yen spiked up as the consumer confidence in Japan rose to a five-month high in March. A report from Japan's Department of Economic and Social Research Institute showed that the consumer confidence index rose to 28.9 in March from 26.7 in the previous month.
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