EURCHF Prints 1.20
After a stronger than expected Swiss CPI, EURCHF came under heavy pressure with the pair briefly trading at the 1.20 level. Poor liquidity conditions and a wave of euro selling across the board were the main drivers. The move was followed by the usual waves of rhetoric from the SNB who said that it remains committed to buying unlimited amounts of foreign exchange to defend the 1.20 floor, and the newswires reported that the SNB were then seen in the market. The credibility of the SNB’s policy has come under scrutiny in recent weeks and today’s events are likely to prompt further questions, even though the bank has remained resolute in its rhetoric. Today’s CPI reading was significantly above expectations at -1.0% y/y. On a monthly basis, the index increased by +0.6%. This was driven by higher oil prices and the feed-through to other products, while the foreign component contributed to the positive print. Elsewhere, risk assets came under pressure and the dollar rallied across the board. As expected the BoE left its policy unchanged and therefore offered no statement. We will need to see the meeting minutes to establish the mindset of the committee. In the US, the focus will remain on the labour market. Wednesday’s in-line ADP release on bodes well for Friday’s payrolls number, while markets are expecting a slight rise today in initial jobless claims. Canada’s employment report will be out too, and a strong performance in full-time hiring would help CAD continue its advance on the crosses.
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