Swiss Franc at Over 1-Week High

The US Dollar exchange rate rose above 0.9 Swiss Franc in the foreign exchange interbank market.

The Swiss Franc depreciated to around 0.89 per USD, its lowest since late November, after the Swiss National Bank cut the key interest rate by a larger-than-expected 50bps, its biggest reduction in almost 10 years.

The consensus was for a smaller cut of 25 basis points, although some analysts had predicted the 50 point cut to stimulate economic growth.

Policymakers mentioned declining underlying inflationary pressures while aiming to maintain appropriate monetary conditions

The Swiss franc was relatively stable around 0.88 per USD, its lowest in a week, amid a slightly stronger greenback and in anticipation of SNB meeting.

The central bank is expected to cut its key policy rate by 25 basis points (bps) at its meeting on December 12th, marking the fourth consecutive reduction, as inflation remains "comfortably" within the central bank’s 0-2% target range.

A small minority of economists anticipates a larger half-point cut at the meeting to stimulate economic growth and curb speculation in the franc.

Consumer price inflation increased to 0.7% in November, up from 0.6% in October, but below the forecasted 0.8%.

Downward pressure is expected in January due to anticipated changes in electricity prices.

Switzerland's economy is growing slowly, with GDP expanding 0.4% quarter-on-quarter in Q3, down from 0.6% in Q2, partly due to weak manufacturing linked to geopolitical tensions and recession in key trading partner Germany.

The Swiss Franc edged higher to around 0.88 per USD after Swiss inflation rose less than anticipated.

Consumer price inflation ticked up to 0.7% in November from 0.6% in October, falling short of the forecasted 0.8%.

This data bolsters expectations for a fourth consecutive rate cut by the Swiss National Bank on December 12.

Policymakers have noted that inflation remains "comfortably" within the central bank’s 0-2% target range, with November marking the third consecutive month below 1%.

These developments, coupled with slowing economic growth, a subdued outlook for the export sector, and upward pressure on the franc against the euro amid political uncertainty in France and Germany, could further justify a rate reduction.

Markets:

• Gold up $4.02 or 0.15% at $2636.60
• US 10-year yield 4.249%, -5.2 basis points
• US 2-year yield 4.223%, -3.1 basis points
• WTI crude oil down four cents or -0.2% and $68.72
• S&P 500 fell -22.89 points or -0.38% to5998.74
• NASDAQ fell -113.82 points or 0.59% to 19060.48
• Russell 2000 rose 1.88 points or 0.08% to 2426.19 .
• Dow fell -138.25 points or -0.31% to 44722.06

No new records were recorded in the major indices today (S&P and Dow closed at records yesterday)

The US dollar is trading lower versus all the major currency pairs. The dollar index is down -0.89% on the day

• EUR, -0.75%
• JPY -1.28%
• GBP, -0.86%
• CHF -0.5%
• CAD -0.19%
• AUD -0.39%
• NZD -1.03%

The US PCE data for the month of October was released today. The favored measure of inflation from the Federal Reserve came in as expected with the headline of 0.2% and the core of 0.3%. Year on year measures came in at 2.3% and 2.8% respectively. Although as expected, inflation remains sticky.

In other data today,

• Personal income was higher than expected or 0.6% versus 0.3%, and consumption was also higher and +0.4% versus 0.3% estimate.
• Initial jobless claims continue to skim near lower levels and 213K vs 216K estimate . However, continuing claims rose to the highest level since November 2021 for both the weekly number and the four week moving average indicative of a more weaker employment picture
• The 2nd look at US GDP came in as expected at 2.8% with consumption and 3.5% versus 3.7% in the initial guesstimate. PS The Atlanta Fed GDPNow estimate for Q4 is also solid at 2.7% vs 2.6% previously.
• Durable goods orders were marginally lower than expectations but revisions were higher.
• Advance goods trade balance came in at $-99.08 billion which was higher than the deficit -108.2B last month The trade numbers for goods especially are elevated due to potential dockworkers strikes (for last month), and may now be influenced by tariffs under the Trump administration.

A widening trade deficit might solicit a lower dollar over time making US goods abroad more competitive.

US yields moved lower with the two-year down -3.1 basis points any 10 year down -5.2 basis points. The US treasury successfully auctioned off 7-year notes with a tail of -1.4 basis points. The bid to cover was higher than the 5-month average at 2.71X vs 2.59X average. The 2 and 5 year auctions were also well received earlier this week.

Bitcoin moved back to the upside after bottoming at $90,742 yesterday. The price today is up $4400 or 4.7% and $96,328. The high price last week reached just under the $100K level at $98,800.

Technically:

• EURUSD moved above it 38.2% retracement of the November trading range at 1.05628. It is trading right around that level going into the close for the day. Stay above that retracement level would give the buyers were confidence. Moving below Macy the price rotated back toward the Tuesday high 1.0544. A move below that level would target the 200 hour moving average of 1.0520 in the new trading day.
• USDJPY fell sharply today after falling yesterday. The move lower today broke below the old November below reached on November 6 and 151.275. The current prices trading at 151.155. If that old low can put a ceiling on the correction, more selling can be anticipated in the new trading day. Move above and we could see rotation back toward its 200 day moving average of 151.980.
• GBPUSD: The GBPUSD extended above its 200 hour moving average of 1.2613 and also above the high prices from Monday and Tuesday near the same level.That gave the buyers the go-ahead to push higher. The run to the upside did not stop until reaching 1.26933 which was about six pips short of the 38.2% retracement of the November trading range at 1.2699 (and the natural resources at 1.2700). The current prices trading at 1.2678. Close support is at 1.2660 in the new trading day. Getting above the 1.2700 level would have traders targeting the falling 100 bar moving average on the 4-hour chart at 1.27266.
• NZDUSD: The NZDUSD was not influenced by the 50 basis point from the Reserve Bank of New Zealand. The price is up 1.06% on the day. The move to the upside took the price up to test is falling 100 bar moving average only 4- hour chart and 0.5904 (currently). The current prices trading at 0.58947 with close support at the broken 38.2% retracement of the November trading range at 0.5889. ON the topside a break of the 0.5904 MA level would have traders looking toward the 50% of the month range at 0.59173. Conversely, break back below the 38.2% at 0.5889 could turn the buyers back to sellers after the corrective move higher over the last two trading days.

Thank you for your support on the day before Thanksgiving. Good fortune with your trading.

Deutsche notes that the post-election moves in US assets are making for significant rebalancing signals on the basis of relative equity performance. According to the signals from their model, this will see potential for dollar supply with the largest signals being EUR/USD demand and USD/CHF supply.

The firm also points out that there has been a theme as of late pointing to weaker USD demand from corporates towards month-end. But if it does play out this time around instead, then month-end flows this time around might be fairly muted. Looking to the turnover to December next Monday, Deutsche does say that there is a relatively consistent theme of USD supply on the first day of December against the G10 currencies. The moves should average around 0.3%.