EUR/CHF: Contrary to recent sessions

EUR/USD

As was the case across most major pairs, the broadly stronger USD dictated the state of the play in the wake of the latest policy announcement by the Fed. Despite the USD coming off its best levels in European trade alongside the German IFO release, which although came in line with expectations, failed to paint as dreary a picture as some had feared, the USD-index later rebounded as US participants entered the market. Another key theme to be aware of is the increasing policy divergence between the Fed and the ECB, with the latest rhetoric from the ECB centered around the prospect of a sovereign bond purchase programme, whereas some participants are even citing April as a potential data for Fed lift-off. As such the pair broke below 1.2300 where there was said to be USD 3bln in option expiries due to roll off at the 10AM NY cut and cement its position in negative territory for the session. Looking ahead, tomorrow sees an absence of tier 1 US or Eurozone data as participants now look ahead to the beginning of the festive period.

EUR/CHF

Contrary to recent sessions, the pair was actually a key source of focus after the SNB took the surprise decision to cut rates and implement a negative rate target. The decision was largely taken with the intention of reducing the attractiveness of the CHF vs EUR in order to maintain the EUR/CHF floor at 1.2000 in lieu of the bearish outlook for the multi-bloc currency. Despite the initial bid tone in the pair, USD/CHF and EUR/CHF proceeded to pare most of the move as the timing of the rate cut was surprising but the SNB's decision was not a shock to the markets. In terms of investment bank response, analysts at Goldman Sachs said the SNB will continue to rely on FX interventions to defend floor. One interesting note as that this is very much a pre-emptive move by the SNB with the rate cut to take effect from January 22nd which is the date of the next ECB meeting. Looking ahead, focus for the pair will be on any further comments from SNB members and whether they will unveil any further measures to defend the floor.

USD/RUB

As has been the case throughout the week, RUB was a key focus for FX markets, following the surprise and significant rate hike by the Russian central bank earlier in the week. In terms of today’s price action, despite seeing an initial move to the upside, the pair saw a bout of stabilisation ahead of Russian President Putin’s economic address. Throughout the early stages of the discussion, RUB remained relatively unmoved with the Russian leader not saying anything too pertinent. However, thereafter, the pair begin to endure a spell of RUB weakening with the pair moving towards the 64.00 handle from 61.00 as the Russian leader has failed to unveil any definitive measures to counter the recent RUB weakness. In the latter half of the session, the pair managed to pull away from its highs and slip back below the 60.00 level with the RUB appearing to show some signs of recovery from the turmoil earlier in the week.