SNB may prefer to focus their attention on USD/CHF rather than EUR/CHF

USD/JPY

USD/JPY has trended downward throughout the European session breaking below 118.00 in the process aided by the safe haven flows into the JPY given the risk off sentiment in the market. The poor US Durable Goods Orders (Dec) M/M -3.4% vs. Exp. 0.3% further dampened sentiment in the US coupled with the slew off poor earnings from notable large cap companies including Caterpillar (-7.5%), Procter & Gamble (-3%) and Microsoft (-10%) attributed to the strength of the USD as the USD-index trades around multi-year highs. T-notes have been bid with unattractive yields sending investors to flock to the JPY to take advantage of interest differentials also partially weakening the USD. Furthermore, Morgan Stanley pushed back their Fed rate hike forecast to March 2016 from Jan 2016.

EUR/CHF

The biggest move of the first half of European trade was seen in EUR/CHF as it touched the session highs of 1.0382 with SNB intervention the suspected catalyst for the move. This comes after comments from SNB’s Danthine stating that the SNB will continue to intervene in the FX market. However, the move was very short lived as the market continues to test the might of the central bank. EUR/CHF remained in positive territory, albeit off best levels as the weaker USD has strengthened the EUR which is helping to prop up EUR/CHF. Interestingly, analysts at IFR suggest that the SNB may prefer to focus their attention on USD/CHF rather than EUR/CHF, due to the risks attached to holding EUR reserves amid the uncertainty that has developed as a result of the Greek election and the announcement of QE by the ECB.

GBP/USD

GBP/USD has continued its upside this week, following hawkish comments over the weekend from Carney and Forbes indicating that a rate hike is likely to occur earlier than what the market currently forecasts. Despite the slight miss on UK GDP (Q4 A) Q/Q 0.5% vs Exp. 0.6%, and the ONS saying that it is too early to conclude that the UK economy is in a general slowdown, GBP/USD remains higher with helped by the broadly weaker USD in the session.