Whispers out of Zurich in early European trading were for the potential for an SNB 50bp move on Thursday. The Franc rallied on the news but the broader Dollar correction, of the overnight sales, kept USD/CHF underpinned above 1.20. As a result CHF crosses reflected the strength with EUR/CHF dropping to 1.5900 & CHF/JPY printed an 8-Year high.
However, domestic data has not reinforced this view of late and despite the hawkish tone to much of the Roth rhetoric, many still erred on the side of caution and preferred to stick to their 25bp Q4 expectations. Thursday is still expected to produce a 25bp hike and with central bankers remaining vexed over the H2 outlook in the mountain economy there is risk on both sides for the accompanying assessment. Hawks will look for clues for a further hike into Q1 2007 (mid-March) while doves will eye alterations to official projections.
Standing offers in USD/CHF into 1.2035 capped the move higher as the Franc gave back its early cross gains. More offers are noted into 1.2040/50 but the attention in the short-term will be on the Trade data & FOMC (19:15 GMT).
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