Swiss unemployment fell to 2.9%
According to the latest report from the State Secretariat for Economic Affairs (SECO), the Swiss labour market continued to improve in March and this in spite of still overvalued Swiss franc. The unemployment rate beat median forecast of 3.0% as it printed at 2.9% (3.2% in February. When adjusted for seasonal factors the gauge stood at 2.9%, unchanged from the previous month and in-line with expectations.
In the FX market, the news went mostly unnoticed as market participants focus on the trade tariff argument between the US and China. After Friday’s sharp moves, the volatility was relatively low on Monday morning. Traders are still trying to interpret the last US job report. Indeed, Nonfarm payrolls came in well below estimates, printing at 103k versus 185k median forecast, while previous month reading was upwardly revised to 326k from 313k. The unemployment rate stood at 4.1%, while economists were looking for 4.0%.
Since mid-March, the US 2-year Treasury yield has been trading between 2.25% and 2.35%. However, over the same period, inflation expectations have decreased significantly, falling from 2% to 1.78%, as investors desperately wait for a significant increase in wage pressure. Despite the sustained positive developments in the job market, the lack of reaction on the wage side suggests that there is room for further improvement.
After testing 0.9649 last Friday, USD/CHF stabilised around 0.9595 this morning. Despite failing at breaking the key 0.9630-60 resistance area, the pair is still trading within its monthly uptrend channel. We believe that the greenback has just only gone back to take a better jump forward against the Swissie. On the upside, the following resistance lies at 0.9766 (Fibo 50% on December-February debasement). On the downside, a support can be found at 0.9420-35 (previous low and 50dma).
France imports and exports decelerate
Supported by lower inflation for the month of February (February consumer price index +0.20%), France February trade balance remains strongly in deficit, below its 5 years average of EUR -4.64 billion and slightly higher than previous month, given at EUR -5.19 billion (previous: EUR -5.42 billion). Over 12 months period, the deficit reaches EUR -60.2 billion (2017: EUR -62.5 billion), backed by a slowdown in imports for the month of February, estimated at EUR 44.90 billion (-1.40%). Exports are stabilizing, valued at EUR 39.7 billion (-0.90%), put under pressure by chemicals, electric materials and telephony exporting sectors while contributors such as aerospace and transportation remain. Accordingly, we remain positive as to the French economic recovery outlook, waiting for Tuesday’s February industrial production monthly data that are expected to deliver positive numbers.
French equity index CAC 40 shows signs of robustness, ending previous week in positive numbers (+1.76%) and providing higher performance than its European counterparts on a year to date basis, currently given at -1.02% (Euro Stoxx 50: -2.74%, DAX: -5.24%, Ibex 35: -3.08%, SMI -7.58%), confirming its favorable defensive bias in the context of higher volatility.
EUR/USD bearish pattern started in mid-February continues (-1.87%), the pair is currently trading at 1.2270, heading along the 1.2265 range in the short-term.
