Broad-based weakness in the US dollar contributed to strength for the euro and Swiss franc, but when it comes to EUR/CHF, there’s upside potential ahead of the Swiss National Bank’s next rate decision on Thursday at 9:00 ET. Indeed, EUR/CHF broke above intraday trendline resistance at 1.4750 on Wednesday morning, adding to downside risks for the Swissie since the SNB is expected to cut their 3-month Libor target rate down to a range of 0.0 percent - 0.50 percent from 0.0 percent - 1.00 percent. Looking at the fundamentals for the region, Q4 GDP contracted for the second straight quarter at a rate of 0.3 percent while February’s CPI numbers show that inflation is barely holding positive at an annual rate of 0.2 percent. The Swiss economy has taken a severe hit from waning demand for Swiss goods by the country’s European neighbors, as exports fell 8.1 percent in Q4. With this scenario unlikely to change anytime soon, the odds remain in favor of another rate cut by the SNB, but ultimately the news may not have a large impact on the Swiss franc because the change is so minimal and as interest rates fall lower, changes have less of an impact on the economy and financial markets. It is worth noting that the Swiss franc did tumble against most of its major counterparts when the SNB last cut rates in December, but gained against the greenback, so a repeat may not be out of the question.
Related Article: Euro Weekly Trading Forecast
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