The USD/CHF pair collapsed 120 pips, to a fresh 10-day low, at 0.9610 as the increased safe-haven demand due to rising geopolitical concerns allowed the CHF to gather strength against its peers.
The U.S. dollar slipped 1.06 percent to a near two-week low against the Swiss franc and fell to 109.94 yen. This is the lowest level in nearly two months against the Japanese currency.The warning came after U.S. President Donald Trump told North Korea that any threat it presented to the United States would be met with "fire and fury."
The Swiss franc was on pace for its biggest single-day rise against the euro since the Swiss National Bank removed its cap on the currency in January 2015.
The U.S. dolar rose today against a basket of major rivals so far this year after a strong U.S. July payrolls report. America’s economy has beaten expectations by creating 209,000 new jobs in July. June's employment gain was revised up to 231,000 from the previously reported 222,000, while average hourly earnings increased 0.3 percent to match expectations after rising 0.2 percent in June. An upbeat Non-Farm Payroll report also showed the jobless rate has fallen to 4.3%, while annual wage growth remained at 2.5%.
The outlook for a December rate hike remained uncertain
"The dollars strength is a combination of strong payrolls, of this news on the repatriation front, and positioning," said for CNBC, Alvise Marino, FX strategist at Credit Suisse in New York. The dollar has suffered in recent months on increased doubts that the Federal Reserve would raise interest rates again this year and obstacles to U.S. President Donald Trump's pro-growth agenda. The real economy remains on a strong growth path at the start of the third quarter. The outlook for a December rate hike remained uncertain at this moment, despite the jobs data. If the labour market continues to tighten in the next months, the Fed will raise rates again later this year.
Oil prices fall on signs market still oversupplied. According to most analysts, U.S. crude stockpiles fell again last week, but supply from OPEC rose in July, a Reuters survey showed. U.S. inventory reports due on Tuesday and Wednesday are expected to show crude stocks fell by 2.9 million barrels last week.
Production rose, despite the deal
OPEC production rose in July, according to a recent Reuters survey, despite a deal to cut output. Some of the buyers that helped boost U.S. oil futures by more than 16 percent since the contract dropped below $43 a barrel in late June. "Global demand is looking pretty strong, and prices will firm around the levels seen today," BP Chief Financial Officer Brian Gilvary told Reuters.The OPEC, along with Russia and other non-members are reducing output by about 1.8 million bpd from Jan. 1, 2017 until March next year to get rid of excess supply. Oil output by OPEC rose last month by 90,000 bpd to a 2017 high.
The Swiss franc's fall to its weakest since the collapse of an official cap in 2015 dominated major currency markets on Thursday. The dollar recovered from a fall to 2-1/2 year lows. The Swiss had already fallen almost 2 percent this week. It was held largely steady for the past two years between capital seeking the security of Switzerland and a campaign of official intervention against the currency.
SNB holds 3-month Libor target range
The Swiss National Bank faces the prospect of adjusting its monetary-policy toolkit because the interest-rate benchmark it targets will be discontinued in 2021.The SNB has been targeting three-month Swiss franc Libor since 2000. Yet Libor, the benchmark underpinning more than $350 trillion of financial products, will be phased out by the end of 2021. In the wake of the manipulation allegations, Switzerland’s central bank joined international efforts to reform reference rates. There has also been a Swiss working group looking at the two rates for the local money market, the secured Swiss Average Rate Overnight (SARON), and unsecured TOIS.
European markets fall and euro is near a two-year high after Mario Draghi says that tapering will be discussed in the autumn.
Many analysts foresee a tightening in policy next year. ECB policymakers believe that the October meeting will be suitable for a decision on the QE program.
"If the outlook becomes less favorable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the program in terms of size and/or duration," the ECB said in its policy announcement alongside its rate decision.
The pan-European Stoxx 600 was down 0.7 percent with most sectors moving south.Auto stocks led the falls in early-afternoon trade, down by more than 3 percent. Valeo dragged down the sector, down by 6 percent, after its first half year result came in short of analysts' expectations. ACS was down 6 percent after reports that it is considering a bid for the Italian family's Atlantia.
Materials stocks, among the worst performers
Telecoms were the only sector moving slightly higher on 0.09 percent, also on earnings news.Meanwhile, Vodafone reported better-than-expected revenue growth for its first quarter, mainly thanks to the Italian and Spanish markets. Its shares were up by 1.3 percent. Materials stocks and construction were also among the worst performers, down by 1.5 percent.
Metso, the worst-performing stock
Paysafe rose to the top of the European benchmark, up by nearly 7 percent, after Blackstone and CVC Capital made a $3.71 billion bid for the company. Metso (down by 7 percent) was the worst-performing stock, after reporting second quarter results below expectations.
The greenback tumbled recently, but analysts weren't pointing to weaker-than-expected U.S. inflation data. Flat consumer inflation and a surprise drop in June retail sales triggered new doubts that the Federal Reserve will be able to raise interest rates again this year.
The consumer price index was up 1.6 percent on-year in June, the fourth month of surprising weakness.Retail sales fell 0.2 percent in June, down for a second month, raising concerns in markets about the strength of the economy.
The euro jumped 0.9 percent to $1.1580 amid the greenback weakness and speculation that the European Central Bank could signal its intent to scale back monetary stimulus. The Republican leadership delayed Senate consideration on the health-care legislation as U.S. Sen. John McCain was suggesting even the procedural vote count may come down to the wire. House Republicans in marginal districts who voted for the Obamacare are waking up . Of the 238 House Republicans, just 20 bucked their party leadership Thursday to vote against the American Health Care Act.
The Canadian central bank’s benchmark rate was raised to 0.75 percent, from 0.5 percent. The Bank of Canada (BOC) said the acceleration in growth, and its broadening to more sectors and regions, has increased its “confidence” the economy will continue to grow above potential, meaning excess capacity is being absorbed.
“Governing Council judges that the current outlook warrants today’s withdrawal of some of the monetary policy stimulus in the economy. Future adjustments to the target for the overnight rate will be guided by incoming data as they inform the Bank’s inflation outlook, keeping in mind continued uncertainty and financial system vulnerabilities,” it said in the statement.
No forecasts for a future interest rate increase
Governor Stephen Poloz said that “what the recovery suggests to us is that the interest rate cuts that we put in place in 2015 have largely done their work.” Asked if rates could be raised again later this year, Stephen Poloz says will not make forecasts. The forecasts for exports and investment are very, very prudent. “Were very disappointed in Q1 export data, but recent data more encouraging. We think there's still some room to grow once output gap closes.”, said Poloz.
Oil prices fell more than 3 percent today, ending their longest bull-run in more than five years. According to Thomson Reuters Oil Research, Oil exports by the OPEC climbed for a second month in June.
OPEC exported 25.92 million barrels per day (bpd) in June, up 450,000 bpd from May and 1.9 million bpd more than a year earlier. "Oil bulls have numerous obstacles to overcome," said Stephen Schork of the Schork Report, pointing to rising OPEC output and high production in the United States.
The rise in exports comes despite OPEC's vow to rein in production until March 2018.
Another reason of the depreciation of oil prices was that the car group Volvo said also today that from 2019 all of its new models would be fully electric or hybrid vehicles.
Mark Carney said the Bank of England’s Monetary Policy Committee (MPC) may need to begin raising interest rates. He will debate a move in the next few months. Lifting rates hinges on whether spare capacity in the economy erodes and the balance between supporting growth and tolerating faster inflation becomes less stark, he said.
“Some removal of monetary stimulus is likely to become necessary if the trade-off facing the MPC continues to lessen and the policy decision accordingly becomes more conventional,” the governor Carney said at the European Central Bank Forum on Wednesday in Sintra, Portugal. The pound rose after his remarks. According to Mark Carney, he will look at three factors to inform his decision about raising rates: the extent to which weaker consumption growth is offset by other areas of demand such as business investment, wages and labor unit costs, and how the economy reacts to Brexit.
The European Central Bank (ECB) will have to be prudent to gradually adjust its monetary stimulus to the economic recovery, said Mario Draghi, the president of the ECB, at the ECB Forum in Sintra, Portugal.
Draghi made it clear however that the current stimulus needs to remain in place as inflation dynamics remain "more muted than one would expect."
"We can be confident that our policy is working and its full effects on inflation will gradually materialize. But for that, our policy needs to be persistent, and we need to be prudent in how we adjust its parameters to improving economic conditions," Draghi said.
He added: "The current context where global uncertainties remain elevated, there are strong grounds for prudence in the adjustment of monetary policy parameters, even when accompanying the recovery. Any adjustments to our stance have to be made gradually, and only when the improving dynamics that justify them appear sufficiently secure."
"All the signs now point to a strengthening and broadening recovery in the euro area," Draghi, said recognizing the improvements. He also argued that the inflation dynamics aren't solid enough to exit the stimulus program.
According to him, "we are still in a situation of continuing slack, and where a long period of subpar inflation translates into a slower return of inflation to our objective. Inflation dynamics are not yet durable and self-sustaining. So our monetary policy needs to be persistent”.