EURCHF Exchange Rate

Euro area manufacturing sector remained in the contraction zone but deterioration in production and orders slowed, survey results from S&P Global showed on Friday. The final HCOB manufacturing Purchasing Managers' Index posted 44.2 in November, up from 43.1 in October. This was the highest since May and above the flash estimate of 43.8.

Switzerland's economy rebounded in the third quarter underpinned by exports and consumption, official data showed on Friday. Gross domestic product grew 0.3 percent sequentially, in contrast to the 0.1 percent fall in the previous three months, the State Secretariat for Economic Affairs said.

Eurozone inflation eased more than expected to the weakest in more than two years in November and the unemployment rate remained unchanged at a lower level, raising hopes that the European Central Bank may cut interest rates earlier than currently forecast. Inflation softened to 2.4 percent in November from 2.9 percent in October, flash data from the statistical office Eurostat revealed Thursday.

Germany's unemployment rate rose unexpectedly in November as the economic downturn damped job creation, official data revealed on Thursday. The jobless rate rose to 5.9 percent in November, while it was forecast to remain unchanged at 5.8 percent. The rate was the highest in two and a half years.

The EUR/USD pair has bounced back from its recent low of 1.0450, but it could struggle to find enough buyers as it approaches the 1.0530/1.0550 range. The US dollar remains an unattractive sell, and there is currently no compelling narrative in the eurozone to counter the exceptionalism story in the United States.

The downside surprise in US June CPI inflation has seen the dollar drop to new lows for the year. Over recent months I had been speculating that clear signs of US disinflation - and a weaker dollar - may emerge in 3Q23 and yesterday's moves could well be the start of an important market adjustment. 

Late cycle dollar strength meets the carry trade. I see two key themes driving FX markets in the near term. The first is central banks continuing to battle inflation, yield curves staying inverted, and the dollar continuing to hold gains. The second is cross-market volatility continuing to sink - generating greater interest in the carry trade. Expect these trends to hold into Fed, ECB and BoJ meet

Initially, the positive NFP gains gained attention, but this was quickly dampened by the first decline in household employment this year and a higher US unemployment rate, reaching a one-year high.