Fundamentals have supported the Franc fight-back intraday and the unit has not disappointed with gains against both the Dollar and the Euro. Today a large Swiss outfit raised their forecasts for growth in the mountain economy in 2007 and 08. The name in question now looks for an annual growth rate of 2.3% in 2007 (from 1.9% previously), while 08 is forecast at a "still fairly impressive" 2.0%.
Rumors yesterday surfaced that the G7 might look at the Franc instead of the Yen but foreign currency investors still interpret the positive signals from Europe and Switzerland as a sign that a good funding environment remains. Therefore, further EUR/CHF gains remain a very real prospect and the 1.6500 options loom in the cross as a bull target. However, the cross has broken back below 1.6370 support and is now looking to fill 1.6350 bids and remove the stops noted below.
Elsewhere, a prime US investment house has today revised their forecasts for EUR/CHF. They now see the cross trading at 1.65, 1.65 and 1.62 in the 3, 6 and 12 months respectively. This contrasts to the Swiss forecast of 1.58 in H2 07 and our IFR forecasts of 1.60 by year-end.
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