The euro and Swiss franc were “middle of the road” currencies on Wednesday, as they slumped against the commodity dollars but rallies versus the US dollar, Japanese yen, and British pound. In fact, both the euro and Swiss franc hit fresh 2009 highs against the greenback. European data was in line with forecasts, as Eurostat confirmed that the annual rate of CPI growth rose to -0.2 percent in August from -0.7 percent, while core CPI went unchanged at 1.3 percent. This is essentially what the European Central Bank has called for in recent months by saying that inflation would likely fall negative mid-year before returning to positive territory in the following months.
Looking ahead to Thursday, the Swiss National Bank is likely to leave their 3-month LIBOR target range unchanged at 0.0 percent - 0.75 percent, but the thing to watch for in the SNB’s subsequent policy statement is talk of FX intervention. The central bank reiterated during their last meeting in June that they would “take firm action to prevent an appreciation of the Swiss franc against the euro,” but 1.50 has really proven to be the one point in EURCHF to prompt them to take action. Overall, if the SNB takes a more aggressive stance on the issue this week, EURCHF could easily surge higher, but if the bank drops their statements on the topic altogether, the Swiss franc is likely to surge across the majors.
Al Bawaba
