Swiss Producer and Import Prices Fall for the Third Month, Fueling Bets for SNB Rate Cut

Fundamental Headlines

• IEA Cuts Oil Demand Forecast – Wall Street Journal
• Calpers Confronts Huge Housing Losses – Wall Street Journal
• Morgan Stanley to cut 2,000 jobs as it refocuses – Financial Times
• BT to Cut 10,000 Jobs; Second-Quarter Profit Falls – Bloomberg
• Wal-Mart Profit Increases After Grocery, Medicine Discounts – Bloomberg

• EURUSD – The preliminary GDP reading for Germany showed that Europe’s largest economy slipped into a technical recession for the first time since 1996 as the economy contracted 0.5% in the third quarter. The release failed to meet expectations for a 0.2% decline in growth, which suggests that economic activity is slowing at a faster pace the initial forecast held by economists. Meanwhile, the European Central Bank lowered their forecasts for inflation and growth as the repercussion effects of the financial crisis spills into real economy. Policymakers expect inflation to moderate to 2.2% in 2009, while they anticipate the economy to growth 0.3% in the next year. The central bank noted that economic activity will remain subdued for a ‘protracted period of time,’ which leaves the door open for additional rate cuts by the ECB as prices pressures alleviate. Discuss the topic and your trade ideas in the EUR/USD Forum.

• USDCHF – The Swiss ZEW investor confidence survey unexpectedly improved to -88.5 from -91.1, indicating that market fears are beginning to subside as policymakers all over the globe increase their efforts to avoid a global meltdown. Despite the surprising improvement, financial conditions remain far from normal, and conditions may get worse over the coming months as the major economies of the world head into a recession. Meanwhile, producer and import prices in Switzerland fell for the third straight month in October on the back of falling oil prices. The headline reading slipped to 2.9% from 3.7% from the previous month, and will certainly provide the Swiss National Bank with more room to lower borrowing costs in the months ahead. For more news and resources, visit the new Swiss franc Currency Room.