CHF firmed up as market reduced risk after the U.S. bailout talk stalled late Thursday. EUR-CHF traded below the 1.5900 handle and extended to 1.5876 lows, which has encouraged some hedging activity via options market. 1-wk EUR-CHF 1.5800 traded at 8% in modest size amid concerns that the U.S. political discussions will continue deep in to the next week before a solution is reached. In the meantime, money markets are struggling, which has forced more liquidity measures by the ECB. BoE, SNB and Fed, with an additional one week USD liquidity operation provided. The European banking sector is also back in the spotlight, with problems at Fortis getting some airplay today as share drop 13%. Meanwhile, USD-CHF is relatively stable considering the market conditions, with the pair trading close to the 1.0900 handle.
