USD/CHF Forecast Dec. 8, 2011, Fundamental Analysis

On Wednesday trading, the Swiss franc declined against the dollar and other majors on mounting speculations the SNB will use negative interest rates to boost the economy and halt the currency’s appreciation.

A report released on Tuesday showed that Swiss consumer prices dropped 0.5% from a year earlier, marking the sharpest drop since Oct. 2009, raising speculations the SNB would intervene again to boost the economy especially as the most recent data showed slowdown in growth along with the fall in inflation.

On Wednesday, Swiss unemployment data could not calm down investors where it showed that Swiss unemployment remained at the lowest level in three years at 3.0% in Nov.

Eyes are on next week’s rate decision especially after Finance Minister Eveline Widmer-Schlumpf said negative interest rates and capital controls “are issues which are being examined.”

Moreover, the general sentiment in markets remained mixed on hopes, amid absence of data from theUnited States, European leaders will succeed in this week’s summit in shoring up their economies and calming down markets while concerns after S&P downgrade warning remained to have negative impact on investor’s risk appetite.

Both German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed on a proposal that would put strict budget discipline to be discussed by other members in the summit this week.

On Thursday, at 13:30 GMT, the U.S economy will release initial jobless claims for the week ended Dec. 2 and continuing claims for the week ended Nov. 25 will be available. Then, Wholesale inventories will be out at 15:00 GMT.

The data is expected to affect the pair due its importance, yet it is expected to be also affected by the general sentiment which is tracking the latest developments in the euro region with eyes on the EU summit.

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