The monetary policy announcement from the Swiss National Bank tops the economic calendar in European hours with volatility likely as the central bank weighs up an increasingly credible deflationary threat. The last policy meeting saw the SNB announce one of the most aggressively dovish monetary policies among top global economies, sending the Franc tumbling with promises of quantitative easing and currency market intervention in an effort to keep price growth from settling in negative territory. Since then, the annual pace of consumer price growth has dropped to a record-low -1.0% and appears likely to extend losses after Producer Prices fell by the most in over two decades, hinting at shrinking price tags on final goods as firms pass on lower input costs. Indeed, yesterday saw SECO revised lower the government’s official CPI estimate to -0.5% in 2009, down from the -0.2% forecast reported in March. Although overnight index swaps reveal that traders are pricing in virtually no chance of a change in benchmark interest rates, an expansion of unconventional policies seems likely. However, it is uncertain what such actions could practically look like considering the SNB is already throwing everything but the kitchen sink behind its monetary efforts, adding to the likelihood of erratic price action as the announcement hits the tape.

UK Retail Sales are expected to shrink -0.4% in the year to May, the first decline since February. Receipts have trended lower since May of last year, with the forthcoming result extending falling firmly within the outlines of the overall trajectory. Although consumer confidence rose for a second consecutive time last month following a recovery in stock prices as well as signs of moderating turmoil in the housing market, rising unemployment is set to undermine retail activity going forward, trimming disposable incomes and weighing on spending for those already out of work and encouraging cautionary saving for those still holding on jobs. The latest labor-market data revealed the claimant count rose to 4.8%, the highest in over 11 years, despite a smaller-than-expected gain in jobless claims. Indeed, a survey of economists conducted by Bloomberg expects the jobless rate will average 8.2% this year and 10.2% in 2010, suggesting month-to-month volatility in claims figures is hardly reason enough to be optimistic about Britons’ job prospects in the foreseeable future.

Tags: British Pound, Central Bank, interest rates, Swiss Franc

This entry was posted on Wednesday, June 17th, 2009 at 9:12 pm and is filed under British Pound, Currency Trading, Economic Indicators, Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.