Today Swiss inflation data dented the Swiss rate outlook and as a result the Franc was placed by on the funding-block. CHF carry trade interest has been renewed in the wake of the January 0.7% CPI fall as economists scale-back their expectations for the 2007 tightening. One Swiss player is now looking for just one hike in 2007 (25bps in Q1), while IFR still opt for 2 moves (25bps in Q1 with a further data dependent Q2 25bp move).
USD/CHF was bought from 1.2415 to just shy of 1.2500 before decent sellers finally emerged. Good clumps of offers were absorbed around 1.2430,50 & 1.2465/70. Offers into the 1.2500 are now attempting to stall further Franc weakness but the stops, above 1.2520 & 40, are said to be targeted by short-termaccounts.
Against the Euro the resurgence of carry funding has forced the cross back above 1.6200. The rally from 1.6165 finally encountered decent supply into 1.6225 and dealers again note [EUR/CHF] option barriers into the 1.6300 mark. [GBP/CHF] was bought back above 2.45 but offers ahead of 2.46 have capped further strength.
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