The Swiss National Bank and Swiss Franc Blog

Previous Entry Share Next Entry
DRAFT: Why the break of the floor might be a matter of weeks and not months or years

It is the same procedure as nearly every year: The statistically flawed (here and here) Non-Farm Payrolls (NFP) delivers some good readings with 200K jobs, this time additionally fuelled by a weather effect and stock markets rise strongly. Even given this statistical failures, markets forget regularly that 200K is only a bit above the average 150K new jobs (in May even 206K) needed to compensate for the net death/birth effect and that this 50K difference must be repeated every month over 14 years in to come back to full employment and cover the 8.8 million jobs lost in the financial crisis.

And then stock markets sell off in their typical "Sell in May" mode, because the 200K NFP reports are not sustainable, especially this year due to the weather adjustment into the opposite direction (worse to come in June).

On the other side of the atlantic a similar procedure repeats: Thanks to the good mood in the US economy, US orders to Swiss and German exporters rise and Swiss consumers keep on spending, the Swiss economy keeps on running close to full employment, German unemployment  beats record lows. Consequently the Swiss Q1 GDP rises strongly, beating with a +0.8% QoQ even the US +1.9 YoY, despite the fact that US GDP must grow more strongly than the Swiss one due to the strong US birth/death effect.

As soon as American investors see the bad US data, they look into different directions and realize that there are some other safe-havens, not only the US dollar, especially when the Fed is threatening their currency with Quantitative Easing again.

And this is the way history repeats during the weak US months May to September on the other side of the Atlantic:

Between May and July 2009, the SNB managed to maintain the 1.50 EUR/CHF line in sand thanks to intensive FX intervention threads. Same picture in May 2010: Strong demand for the Swiss Franc, even multiplied by the first Greek crisis. The EUR/CHF falls to 1.40. After the SNB had abandoned the FX interventions  the Swiss Franc even reaches parity with the dollar and EUR/CHF 1.30 in September 2010.


Log in

No account? Create an account