Spot has managed to match the 1.2670, printed before the PBOC on the Dollar decline, but failed to extend any further. As the dust settles and volumes tail-off once more the price is now looking to consolidate the move higher by trading close to the 1.2650 mark. Dealers are looking for the US entrance to herald the next directional bias but offers are still tipped into 1.2675 and again from 1.2690 back to 1.2700. On the downside, only a break sub- 1.2645 will take the focus back off the topside.
Elsewhere, the SNB today noted in its quarterly report that the Swiss Franc was still an attractive buy for carry trades but "rapid changes in the exchange rate made this a risky strategy". Excluding factors of transaction costs and liquidity the domestic report from the central bank notes that "carry trades are exposed to high exchange rate risks" and that the SNB has continued to emphasize that this risk remains, if not grow as the markets build deeper short CHF positions. On growth the SNB 2007 GDP rate of +1.8% looks in line with market expectations, if a little on the moderate side, however, as ever the KoF is there is speculation on the risk.
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