Rumors about a new SNB movement are breaking the market today: the Swiss National Bank is said to be considering to establish a new floor on the EUR/CHF at 1.2500. The success of the latest peg to 1.2000 has spurred the market who bought the rumor and launched the Swiss Franc strongly down.
This morning the Swiss government downgraded his economic outlook for 2011 to 1.9% and 0.9% in 2012 on the back of a strong Swiss Franc. The previous forecast in June was a GDP rises of 2.1% for 2011 and 1.5% during 2012. "The economic outlook for Switzerland has deteriorated for Switzerland over the past few months," says the official SECO (State Secretariat for Economic Affairs) statement released today. They believe that the "unfavorable foreign trade conditions" and the "high valuation" of the CHF will damper the Swiss economy even "after introduction of an exchange-rate floor to the Euro."
The SECO forecast also underlines that the exports during 2011 will be lesser than previously estimated in June. The Government expects now an increase of 3.2% in exports during 2011 (previous 4.6%) and 0.7% in 2012 (previous 3.0%).
"The rumor has not been unsubstantiated but given the success of the 1.20 peg in halting the Franc's rise", comments Kathy Lien, Director of Currency Research for GFT, "the SNB could very well be aiming for the stars with a 1.25 peg."
The Swiss Franc has plummeted across the board. EUR/CHF has rocketed from 1.2060 to 1.21.80, to retest Sept 9 highs, while the USD/CHF jumped from day lows are 0.8790 to 0.8870, and the GBP/CHF rallied from 1.3825 to 1.3970.
"Rumors had busted the USD/CHF towards 0.8921, a couple of pips below the 4 month high set past week," comments Valeria Bednarik, FXstreet.com Chief Analyst. "Bias remains bullish in the cross despite technical indicators are mostly saturating just above their midlines both in 1 and 4 hours charts, showing a limited bullish momentum. 20 SMA in the 4 hours chart lies around 0.8770, so the upside," Bednarik continues.
"So the upside is open as long as above this last value," Bednarik concludes. "Currently retreating from mentioned high, pair needs to overcome the 0.8940 static resistance level to attempt a test of the 0.9000 price zone."
The market has launched a rumor and the market has bought it. The SNB has 'declined to comment' it and the CHF is falling.
Check out the first SNB peg-action of Sept. 6th
- The SNB comes to play and sets EUR/CHF minimum at 1.2000 by Mauricio Carrillo