USD/CHF opened in NY at 1.2470, and traded down to 1.2443 following the poor US trade data, however a heavy oversold condition on the hourly studies (RSI below 20) prompted some profit taking. Underlying the rally was also a news story that emanated from AFX news in Europe that the European Commission is at loggerheads with some of the Cantons in Switzerland that offer business tax breaks to multi-nationals to headquarter their companies within their domain.
The European Commission say that the disputed tax breaks are illegal under the bloc's aid rules. The Commission stated that Cantons allowing the "holding, mixed and management companies" breach a bilateral free trade agreement going back to 1972. The EU is particularly upset with schemes offering unfair tax advantages to companies established in Switzerland, for profits generated primarily in the EU. The commission is demanding that Switzerland amend these tax schemes to bring them back in line with the terms of the agreement.
Spokespeople for the Commission also stated that while the commission is not against tax competition or low tax rates, it cannot accept schemes that differentiate between domestic and foreign source income.Traders note that if the EU is successful in reducing the benefits afforded these companies, it will have a deleterious effect on tax collection, and business formation in Switzerland, and may put further upward pressure on EUR/CHF. USD/CHF has traded up to 1.2500 and EUR/CHF up to 1.6265 with this as aleitmotif.
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