As the US Dollar weakens against the Euro the Franc is managing to elicit a further period of strength against the US unit. USD/CHF has finally filled the bids into the 1.20-mark and the overnight lows down at 1.1988 are now in sight.
The Franc strength is not linked to the latest Swiss data as the local ZEW index fell to -2.1 in July. The survey also showed most economists expected the Swiss franc to appreciate against the euro over the coming six months.
On the whole the data does underpin the view that the mountain economy is in a comfortable position. Over at IFR, they are suggesting that a duel SNB hike scenario remains the most likely outcome for the remainder of 2007. Two 25bp hikes should be looked for into H2 07 (one in Q3 in September and the other in Q4 in December) with an outside risk for a more aggressive 50bp move higher from Roth in Q3 should the CHF reversal of late fail to hold.
Against the Euro the Franc has weakened intraday and EUR/CHF has been bought up to the 1.6595/6600 level where option dealers note expiries at the NY cut (14:00 GMT). 1.6595 & 1.6600 strikes are both set to mature today but dealers do suggest that option related supply into the figure will be found in an attempt to cap further spot gains.
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