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Swiss Franc Falls Broadly While Euro Firms Up, Dollar Cautious

Swiss Franc drops sharply today, as pressured by selling against Euro, and rising treasury yields. Dollar once again tries to recover, but there is no committed buying yet. The greenback traders will carefully scrutinize the comments from Fed officials coming out today and tomorrow, as the annual Jackson Hole Symposium goes along. Meanwhile, commodity currencies will look into stocks’ reaction and overall market sentiment.

Technically, EUR/CHF’s strong rebound today raises the possibility that 1.0694 is already a short term bottom. Focus is now turning to 1.0839 resistance. Break there will bring stronger rally back towards 1.0985 resistance. If that happens, we’ll see if EUR/USD would follow and break through 1.1804 resistance. Or, USD/CHF would break through 0.9241 resistance instead.

In Europe, at the time of writing, FTSE is down -0.28%. DAX is down -0.51%. CAC is down -0.25%. Germany 10-year yield is up 0.0179 at -0.402. Earlier in Asia, Nikkei rose 0.06%. Hong Kong HSI dropped -1.08%. China Shanghai SSE dropped -1.09%. Singapore Strait Times rose 0.06%. Japan 10-year JGB yield rose 0.0005 to 0.021.

Fed George maintained it’s a point to begin to ease up accommodation

Kansas City Fed President Esther George told Bloomberg that the spike in Covid is a “risk to the outlook”, but her contacts in the region said the economy “continues to grow at a strong rate”, consumers are “still spending” and labor markets is “continuing to heal”. The outlook “remains a positive one”. The virus is not expected to derail the economy”.

George also maintained that the progress the economy has made suggests “we’ve come to a point where we can begin to ease up on the amount of accommodation”. It’s “time to begin to make those adjustments” on asset purchases.

As policymakers are coming into the September meeting, she said, we will continue to talk about how the economy has unfolded and the timing for adjustments to those asset purchases”.

US initial jobless claims rose to 353k, slightly below expectation

US initial jobless claims rose 4k to 353k in the week ending August 21, slightly below expectation of 355k. Four-week moving average of initial claims dropped -11.5k to 366.5k, lowest since March 14.

Continuing claims dropped -3k to 2862k in the week ending August 14, lowest since March 14, 2020. Four-week moving average of continuing claims dropped -108.5k to 2901.5k, lowest since March 21, 2020.

US GDP grew 6.6% annualized in Q2, revised slightly up

According to the second estimate, US GDP grew an annual rate of 6.6% in Q2, revised up from 6.5%. The update reflects upward revisions to nonresidential fixed investment and exports that were partly offset by downward revisions to private inventory investment, residential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, were revised down.

ECB accounts: Large majority of members see new forward guidance a fine balance

In the accounts of July 21-22 meeting, ECB said a “large majority” of the council members supported the forward guidance proposal, which was “widely seen as providing a fine balance between greater emphasis on outcome-based elements in the forward guidance and a more flexible, forward-looking perspective.”

However, “a few members upheld their reservations, as the amended formulation did not sufficiently address their concerns.”. This related in particular to the “implied likelihood and persistence of overshooting, and being seen as promising to keep interest rates at their present or lower levels for a very long time period without an explicit escape clause.”

ECB also said, the new forward guidance “underscored the Governing Council’s commitment to achieving its new inflation target”. It indicated that ECB would “wait until it was confident about the path of inflation before raising the key policy rates.” Nevertheless, the guidance is “not a rule” but “an indication to financial markets and the broader public” for aligning their inflation expectations.

Germany Gfk consumer sentiment dropped to -1.2, fear of tightened restrictions again

Germany Gfk consumer sentiment for September dropped from -0.4 to -1.2. In August, economic expectations dropped from 54.6 to 40.8. Income expectations rose from 29.0 to 30.5. Propensity to buy dropped from 14.8 to 10.3.

Rolf Bürkl, a GfK consumer expert, commented on this observation: “Significant higher incidence values, a slowdown in vaccination momentum, and discussions about how to deal with unvaccinated individuals in the future have caused noticeable uncertainty among consumers in Germany. They fear that restrictions could even be tightened again. This is obviously depressing consumer sentime