THANKS to Independence Day on 4 July, America’s week began a day late, and currencies remained in a state of suspended animation, with euro-dollar hovering around the $1.4500 level for the past 48 hours. With Greece now a distant memory (at least for the time being), the market’s attention has turned to economic matters rather than political concerns, with everyone eagerly awaiting key US economic data due at the end of this week.

For the past several months, traders have been looking for any signs of a pick up in global economic activity, but so far they have been sorely disappointed. Everywhere you look, economic data remains lacklustre. In Australia, retail sales declined by -0.6 per cent, shrinking for the second month out of the past three. In China, the PMI manufacturing data has drifted dangerously close to the 50 boom/bust level, indicating that growth may continue to slow into the second half of the year. In the UK, the latest PMI readings suggest that the economy will expand at an anaemic 0.3 per cent in the second quarter of this year – unlikely to generate new jobs. Finally, in the Eurozone the latest PMI readings from the core economies of Germany and France show a marked deterioration from their peaks in March.

That’s why last Friday’s US ISM data was a welcome breath of fresh air to the recovery bulls. By printing at 55.3 versus 52.0 eyed, the US manufacturing report suggested that US growth may be rebounding after the slowdown caused by the spike in energy prices. If this Friday’s US non-farm payrolls report confirms the turnaround, the dollar’s biggest gains could come against the Swiss franc. The Swissie has become so grossly overbought over the past several months due to risk aversion flows that it is now very vulnerable to a sharp short covering rally, if concerns over the US debt ceiling issues begin to dissipate at the same time as US economic data starts to show a rebound in activity. If this positive scenario plays out, dollar-Swiss franc could clear the SFr0.8500 level by Friday and head towards the SFr0.8800 figure over the next several weeks as sentiment improves.