US – With sentiment starting to stumble, we have seen the dollar turn into one of the immediate benefactors. This connection to risk appetite means that the long awaited breakout for the world’s most liquid currency may come from out of the blue as optimism often rises and falls without the helm of a specific indicator. There are a few notable pieces of event risk on the economic docket over the coming week (like the ISM services sector survey and trade balance); but the real threat to volatility is the Friday’s NFPs. The market-moving influence of this report has not been absolutely consistent recently; but we should not discount its potential impact. With the trend clearly set in a steady improvement, a smaller than expected net loss (or an actual gain) would likely find the best follow through.
Switzerland – The greatest threat of domestically derived volatility was the recent 2Q GDP report. However, the slower than expected pace of contraction would ultimately fail to make a lasting impression on price action. Now, looking ahead, there are only second tier releases on the docket. Both the August CPI figures (due Friday) and next week’s labor data are economically important but consistently overlooked. Speculators will instead keep their sights trained on the health of the Euro Zone – Switzerland’s largest trade partner – to discern the health of the small, independent nation. It will further be important to keep abreast of risk trends. Low liquidity could help catalyze a meaningful shift in sentiment should US NFPs or the G20 meeting alter the outlook for global growth, financial health or interest rates.
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