Swiss Franc Weakens Despite Upbeat Q2 GDP Report
The Swiss franc drifted weaker in early European deals on Tuesday despite a report showed that the nation's economic growth in the second quarter slowed less-than that of economists' predictions, largely due to positive contributions from private spending and investment.
According to figures published by the State Secretariat for Economic Affairs (SECO), the real gross domestic product expanded 0.5 percent sequentially, which was forecast to fall to 0.3 percent from the prior quarter's 0.6 percent growth.
As seen in the previous quarter, household spending gained 0.6 percent. Moreover, investment recovered strongly in the second quarter, up 1.4 percent after falling 0.2 percent. On a yearly basis, economic growth more than doubled to 2.5 percent from 1.2 percent a quarter ago.
Easing concerns over an imminent U.S. strike on Syria and further signs of economic improvement across the globe lifted the risk-associated currencies' values in the foreign exchange market on Tuesday.
The U.S. President Barack Obama's decision to carry out a limited air strike against Syria may be delayed until at least next week as Republican Senators John McCain and Lindsey Graham said they have more confidence the White House is developing a better strategy to back use of military force.
Equities also rallied after official data indicated another month of reasonably solid growth in Chinese service sector, with the non-manufacturing purchasing managers' index easing slightly to 53.9 last month from 54.1 in July.
Meanwhile, the British Retail Consortium said retail sales in the U.K. increased at a weaker-than-expected rate in August after an exceptional July. Sales value increased 1.8 percent year-over-year on a like-for-like basis, falling below expectations for 2.4 percent growth but keeping well above the 12-month average.
Elsewhere, the total labor cash earnings in Japan increased for a second consecutive month in July, albeit at a slower pace, data from the Ministry of Health, Labor and Welfare showed today. Total wages increased 0.4 percent year-on-year in July, following a 0.6 percent increase in June and a 0.1 percent decrease in May.
At the same time, the Reserve Bank of Australia decided to keep the benchmark cash rate unchanged at a record-low of 2.5 percent, with a possible depreciation of the currency expected to facilitate rebalancing of the economy.
Investors await a slew of reports on U.K. construction activity, producer prices from the euro area and U.S. ISM manufacturing all due out later in the day for further clues on the health of the global economy.
The Swiss franc slipped to 1.4584 against the pound around 2:45 am ET, having extended its strong sell-offs since its failed test of 1.42 resistance on August 28. With the GBP/CHF currency cross is staying well-above its 200-day simple moving average level, the franc is poised to extend its downtrend beyond 1.46 support in the near-term to set its lowest level since June 10.
The franc also fell to a fresh 2-week low of 0.9374 against the US dollar following the GDP numbers, pushing the local unit closer to the pivotal 0.94 area, a level not seen since August 15. The franc has been trading lower since its failure to challenge resistance around the 0.9140/50 area on August 20.
The Switzerland currency dropped to a weekly low of 1.2343 against the euro and a session's low of 106.21 against the yen following the data. The next bearish barrier for the Swiss franc is seen around the 1.2360 against the former and 106.0 against the latter, as CHF/JPY pair is receding well-below from a trend-line resistance of a symmetrical triangle.
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