One of the sharpest moves of the day in the FX market has been in the Swiss franc, which lost major ground against all its significant peers.
By Peter Martin
Friday, May 15, 2015
USD/CHF jumped 1.42% to 0.9251, while EUR/CHF rose 0.8%. The Swiss franc also slid more than 1% against the British pound. The slide in the franc came after a report showed a slump in Swizterland’s combined producer and import price index. Prices were down 2.1% in April, for an annual decline of 5.2%. Falls were apparent in both components of the index, but the fall in import prices was the greater. The Swiss CPI for April was -0.4% and though the Swiss franc weakening should help with import prices, today’s report still suggests deflation could be an issue for the Swiss National Bank.
Draghi backs QE
The euro weakened against many of its major peers on Friday, following comments made on Thursday by ECB President Mario Draghi reiterating his commitment to the ECB’s program of quantitative easing.
‘While we have already seen a substantial effect of our measures on asset prices and economic confidence, what ultimately matters is that we see an equivalent effect on investment, consumption and inflation,’ said Mr Draghi in a speech in Washington. ‘To that effect, we will implement in full our purchase program as announced and, in any case, until we see a sustained adjustment in the path of inflation.’ He also argued that there is ‘little indication’ of financial balances, such as price bubbles.
The euro fell 0.54% against the US dollar in early trading to 1.1346, while GBP/EUR rose 0.27% to 1.3862. Friday’s decline in the euro threatens to end the shared currencies three-day rally against the dollar, but still leaves EUR/USD on track for a fifth straight week of advances.
The Canadian dollar weakened despite the release of encouraging Canadian manufacturing data. Canadian manufacturing sales rose 2.9% in March, bouncing back from a 2.2% decline in February. The gain exceeded market expectations, and the annual change in sales is now back in positive territory at +0.3% and suggesting the Canadian economy had a strong end to the first quarter.
US manufacturing disappoints
US manufacturing is facing a challenging time. US industrial production fell 0.3% in April, the fifth consecutive month showing a decline, and providing yet another piece of evidence that a spring bounce back for the economy just hasn’t happened. Capacity utilization eased to 78.2% from 78.6% in March, while the manufacturing component of the index was flat (versus expectations for a 0.2% rise). The Empire State Manufacturing survey, meanwhile, came in at a lackluster reading of 3.09 for May. Though this is an improvement on April’s negative reading, it was below expectations and does little to assuage worries that a weak export market is hurting the manufacturing sector.
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