quote:
Christina Andersen
The last few trading days have proven a true rollercoaster ride,
especially when you look at the Swiss franc. In time of writing
EUR/CHF is, again, flirting with the level around 155.80. Of
course the main reason behind the latest rise in volatility in
CHF is caused on behalf of the general dollar weakening, and
thereby technical selling in USD/CHF. However, also the Swiss
National Bank President Roth, along with a better than
expected KOF - indicator, has helped strengthening the Swiss
franc. Roth gave a speech late last week regarding economic
growth and future monetary policy and stated, that the central
bank is sticking to its forecast regarding growth and inflation.
Hence, a gradual rate tightening of 25 bp every quarter is
therefore broadly expected from the SNB. The new and
surprising aspect of Roth’s speech was, that he explicitly
mentioned FX moves as a key factor when looking at monetary
policy going forward. If the Swiss franc continues weakening
even further, a normalization of rates would be even more
necessary! Furthermore, Roth is this morning being quoted,
saying that Swiss growth in 2006 will be significantly above the
level in 2005. He is thereby adding further fuel to the present
burning fire, regarding rising market expectation of a 50 bp rate
hike in June. We still foresee a stronger CHF against the EUR
and our advice is still, to handle CHF – funding with care. Next
important level in EUR/CHF is 155.50 – 60, and afterwards 155
is lurking in the wings. Looking at EUR/CHF in a long term
perspective, it is important to mention that a move towards 153
cannot be excluded at all.
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