US dollar traded steadily and in proximity to two-year lows against the Swiss franc on Friday, as expectations were boosted that a small reduction of scale of Federal Reserves monetary stimulus might be introduced at the upcoming policy meeting of the bank.
USD/CHF fell to a session low at 0.8882 at 8:33 GMT on Friday, after which the pair ended the week at 0.8892, dipping a mere 0.01% on a daily basis. Support was likely to be received at December 11th low and also a two-year low, 0.8839, while resistance was to be encountered at December 6th high, 0.8983.
On Thursday the US Department of Commerce reported that retail sales in the country rose considerably in November, as US consumers purchased automobiles and a range of other goods. Retail sales rose 0.7% last month, outstripping analysts’ projections of a 0.6% gain, while October’s sales result has been revised up to a 0.6% increase from a 0.4% increase previously. The overall indicator was mainly influenced by a 1.8% climb in sales at automobile and parts dealers, which offset a 1.1% decline in fuel prices.
Retail sales, which exclude volatile components such as automobile sales, rose 0.4% in November from an upwardly revised 0.5% a month ago, exceeding expectations of a 0.2% advance.
Core retail sales, which exclude automobiles, food services, gasoline and building materials and correspond more closely to the consumer spending component of nations GDP increased 0.5% in November, after advancing 0.7% in October.
These data points added to expectations that the Federal Reserve Bank may consider a small reduction of scale of its monthly asset purchases at the upcoming policy meeting on December 17th-18th.
In the mean time, also on Thursday, the Swiss National Bank (SNB) maintained its benchmark interest rate unchanged at 0.25% in line with analysts’ expectations. The SNB also kept its 2013 forecast for nations economic growth unchanged, saying it expects economic expansion of between 1.5% and 2% this year. During 2014 the central bank projects that the GDP figure will increase by about 2%.
“Given the vulnerable economic situation abroad, downside risks still prevail for Switzerland”, said Thomas Jordan, Governor of the Swiss National Bank, cited by Bloomberg News.
SNBs policy of near-zero interest rates spurred mortgage lending and caused a real-estate boom, as family homes had gained 24% since 2008, while apartment prices had risen 27%.
During the upcoming week market playersattention will be focused on the outcome of Federal Reserve Banks two-day meeting on policy and the press conference with banks Chairman Ben Bernanke.
USD/CHF cross may be influenced by a number of reports, scheduled for publication during next week, as follows:
On Monday (December 16th) the United States will release a report on industrial production for November, accompanied by the results of a survey encompassing manufacturers in the region of New York for December. The same day Markit Economics will publish the preliminary value of its manufacturing PMI for December.
On Tuesday (December 17th) the United States will produce a report on the index of consumer prices for November, accompanied by data regarding nations current account during the third quarter of the year.
On Wednesday (December 18th) the ZEW institute is expected to release its economic sentiment index for Switzerland during December.
The United States will publish a report on housing starts for September, October and November, accompanied by data on building permits for November.
At 19:00 GMT the Federal Open Market Committee (FOMC) will announce its decision on borrowing costs and monthly pace of monetary stimulus along with a rate statement, which underscores economic conditions and factors influencing the monetary policy decision. Interest rate decision is to be followed by a press conference with Fed Chairman Ben Bernanke.
On Thursday (December 19th) Switzerland will report on its trade balance in November. Later in the day the SNB is expected to publish its Quarterly report regarding monetary policy.
The United States will release its weekly report on initial jobless claims, followed by data on existing home sales for November. In addition, the Federal Reserve will report on the results of a business survey, encompassing manufacturers in the region of Philadelphia during December.
On Friday (December 20th) the United States will report on the final value of its Gross Domestic Product for Q3, which is the broadest indicator for nations economic activity.