EUR/CHF Daily Fundamental Analysis for August 09, 2011

The swiss franc returned to its record territories and the appreciation rally returned once again to govern the market amid risk aversion and jitters with the intensified debt crisis at both ends of the Atlantic and also rising threat of recession again.

The swiss franc started the week with strong gains versus the dollar and the euro on renewed jitters and fears and rapid developments over the weekend that pressured the market to open with a wide gap.

We saw the sentiment shift strongly bearish and pessimistically after Standard & Poor’s late Friday after the markets close in the United States downgraded the U.S. top credit rating by one notch to AA+ with a negative outlook which increased the jitters and downside pressure amid already circulating threat of relapse into recession.

Also, the euro remained weak versus swissy on the rising risk aversion and fears of the worsening outlook for global growth and the outlook for the debt crisis. The fear intensified with the speculation over Italy and Spain to be the next to fall which prompted the ECB to take more weekend actions to start buying Italian and Spanish bonds to ease the market pressure on both nations that will eventually crumble under the rising pressure and the speculation will force them to ask for support.

Rising jitters and fears will keep risk aversion evident on Tuesday with the focus turning to central banks and governments and the measures that might be taken to ease the market stress. The pair will continue to fluctuate with fear of another SNB intervention to step the franc’s record gains ahead of the Federal Reserve’s interest rate decision and possible coordinated move by central banks if conditions continued to worsen and accordingly more volatility will be evident on Tuesday.

Also, Switzerland will release the SECO Consumer Confidence for July at 05:45 GMT which is expected to decline to -5 from -1.

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