SNB surprises markets with aggressive move, EZ crisis intensifies

In a surprising move, the Swiss National Bank (SNB) announced that it will set a floor in EUR/CHF at 1.20. Following the announcement, the pair took off like a rocket ship and is currently up by about 7.76% and trading around 1.2030 after making highs of nearly 1.2190 so far. In its press release, the SNB said it “will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities”. The bank went on to say that even at a EUR/CHF rate of 1.20, the franc is still high. This was an aggressive move by the SNB and will be costly as it will have to by euros in unlimited quantities to support the floor. Swiss inflation data released showed a decline in m/m CPI to -0.3% (cons. -0.2% prior -0.8%) and y/y CPI lower than forecast with a print of +0.2% (cons. +0.3% prior +0.5%)

Elsewhere in Europe, German 10-year Bund yields fell to records lows bellows 2% as the sovereign debt crisis heated up. German Chancellor Merkel and Finance Minister Schaeuble said that Greece will not receive aid payments due this month unless it meets conditions outlined in the rescue plan while Finland remained firm on its demands for collateral. Greek 2-year yields climbed 123 bps to rise to record levels of around 51.61% highlighting the increased pressures on the troubled nation. The common currency was broadly higher despite the intensified crisis as the SNB measures to buy EUR/CHF gave the euro support. Economic data released showed Euro zone GDP growth for 2Q at 0.2% q/q as expected from the previous quarter’s 0.8% and 1.6% y/y (exp 1.7%) from the prior 2.4% growth in 1Q showing a slowdown in the economic recovery. German July factory orders were weaker than anticipated with a reading of -2.8% m/m (cons. -1.5% prior +1.8%) and +8.7% y/y (cons. +9.8% prior +9.4%).

The Reserve Bank of Australia (RBA) maintained its cash rate target at 4.75% as expected and the bank noted inflationary concerns as well as the unsettling nature of the global financial markets. There were no indications of a rate cut in the short term as the statement was viewed as neutral however the RBA said that the “Board will continue to assess carefully the evolving outlook for growth and inflation”. AUD/USD rallied to current levels of around 1.0585.

On the data front for the upcoming NY session is the ISM services index for August which is expected to decline slightly from the prior 52.7 but maintain a level above 50 indicating continued expansion.

Источник: Forex.com

06.09.2011