March 14th, 2012 at 8:29 am
The Swiss National Bank holds policy meeting tomorrow, coming under new pressure to weaken domestic currency. Today, in a special session of the Swiss Parliament, many lawmakers urged the bank to take additional steps to combat Franc’s recent revival. While the currency is nowhere near the levels from summer last year, some politicians expressed desire to the CHF at 1.40 against the Euro, calling that level “fair”. Interestingly, though, they also stressed the importance of independent national bank.
We have to wait until tomorrow to see what steps, if any, the SNB will take, but following today’s development clearly many traders expect some action. As things stand now, the interim chief Thomas Jordan could be officially nominated the chairman next month. Perhaps it is important that he shows some resolve in this matter. The focus is on the 1.20 floor in the EUR-CHF, which has been threatened lately. This changed today, as markets took the possibility of further weakening seriously and bought this pair heavily, sending it above 1.21.
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March 13th, 2012 at 6:39 am
The FED interest rate rates decision is due in few hours and currencies are acting as if something big was going to happen. It is not consistent with their behavior in prior months leading to the announcements. Typically, there is some movement during the London session, but once New York trading gets under way, things tend to settle down in anticipation of the release. Perhaps the reason for increased activity is the lack of expectations from the FED. In general, analysts predict that the central bank will do exactly nothing, and we could have the least eventful decision in a long time.
In spite of the positive news from Germany, the Euro is falling, dragging other currencies down against the Dollar. The Germany’s ZEW survey of economic sentiment rose for the fourth consecutive month in March, gaining 16.9 points to 22.3 points – its highest level since June 2010. The EUR-USD has fallen 100 pips since ZEW was released and 130 pips for the day and the commodity currencies are down, too. Things will probably settle down before the FED. As far as the announcement itself, I will sit on the sidelines, as always. However, I might get in later if trend develop, waiting at least 15 minutes after the news hit the wires. If a clear direction emerges, currencies could keep moving that way for another 1-2 hours. We shall see…
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March 11th, 2012 at 10:30 am
After policy meetings from five central banks last week, we have three more in coming days – the FED, the Bank of Japan and the Swiss National Bank. Neither one of them is expected to change their respective interest rates, do markets will focus on easing policies. After recent remarks from Ben Bernanke, it is unlikely for the FED to announce new easing steps. As for the Bank of Japan, it may be pleased with latest developments in the USD-JPY. The Yen is getting weaker, just what the bank wants, so additional round of asset purchasing could be put on hold. However, the BoJ is more likely to take new steps than the FED.
That leaves the Swiss National Bank. In Switzerland, financial authorities are under intense pressure to weaken the Franc. Recently, though, the CHF became stronger across the board, except the EUR-CHF where it is stuck at just above 1.20. It is the “floor”, which the SNB promised to defend. The central bank is likely to threaten additional actions in order to keep the EUR-CHF above this level. It remains to be seen exactly what the bank might do, but chances are the SNB will act before the other CB’s do.
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