Swiss Franc Rallies on Safe Haven Status as Middle East Tensions Continue
Posted February 24th, 2011 by adminThe safe haven Swiss franc rallied in the markets recently, spurred by Middle-East tensions, whilst the US dollar suffered, partially pressured from the decrease in American Treasury yields as well as technical factors. The Swiss franc, usually sought in periods of political unrest, will likely stay firm versus other currencies if the situation in the Middle-East escalates.
Having said that, the forex trading markets are not all one-way traffic. Supporting a stronger US dollar, the Philadelphia Fed said in a recent report that American Mid-Atlantic business activity recovered greatly in February, & American inflation & weekly claims for benefits came in above predictions.
Factory activity in the United States Mid-Atlantic area increased far more than anticipated in February, increasing to its highest zone in 7 years, figures showed recently. The Philadelphia Fed Bank said that its business activity index increased to 35.9 this month, up from 19.3 in January. It was the strongest reading since January 2004. Analysts had predicted a reading of 20.9, according to a survey, which had a range of 15.0 to 25.0. Any result over zero implies expansion.
Also supporting the dollar forex rates is the fact that American core consumer prices have increased at their fastest pace in over a year last month, government numbers showed recently, even so the rise was not robust enough to imply a build up in inflationary pressures.
The US Labor Department said that its Consumer Price Index, excluding energy & food, increased 0.2 per cent, the biggest gain since 2009, after increasing 0.1 per cent in December.
The rise, which was above economists’ estimates for a 0.1% gain, was fuelled by increases in the price of apparel, shelter & airline fares. The increase implies the disinflationary trend of the market in core inflation should have bottomed. If inflation increases then an interest rate rise will be more likely and that will make the dollar more attractive.
Minutes of the latest Fed meeting were released recently & echoed US Federal Reserve Chairman Bernanke’s testimony to the House of Representative. The United States central bank was positive about the outlook for the economy. However it was not optimistic enough for the stock markets to change their estimates that debt purchases, known as QE, will last until June.
Officials believed risks to the economic recovery were dissipating & that an extension of the bond purchase program was doubtful, the minutes revealed. US Federal Reserve officials lifted their 2011 growth estimated to a range of 3.4% to 3.9% from their November forecast of 3 per cent to 3.6 per cent, despite that projections for 2012 & 2013 were almost unchanged.
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