FOREX: Franc May Rise On SNB Rate Decision, Euro Eyeing ECB Report

By Ilya Spivak, Currency Strategist

Talking Points
  • SNB to Stick to Dovish Rhetoric But Shy Away from New Easing
  • FX Markets to Look for Rate Cut Clues in ECB Monthly Report
  • Japanese Yen Sank on Rising US Treasury Yields in Asian Trade

The Swiss NationalBank interest rate decision headlines the calendarin European hours. Data reported since the last sit-down inDecember pointed to deepening deflation, with the yearly CPI ratehitting a 29-month low at -0.9 percent in February. This suggestsSNB Chairman Thomas Jordan and company are likely to maintain anaccommodative stance, talking up the threat posed by falling pricesand reiterating their commitment to the EURCHF floor at1.20.

With that in mind, the run-up in oil pricessince the beginning of the year is likely to nudge up short-termoutlook for price growth, meaning additional easing (such as anincrease in the EURCHF floor for example) is unlikely for now. Agradual improvement in the performance of Swiss economic datarelative to expectations ought to help on this front as well.The Franc has run up considerably against the Euro sincethe beginning of the week ahead of the SNB announcement, whichcould reflect building expectations for a more dovish posture. Thismeans some disappointed EURCHF selling may materialize after thepolicy statement comes across the wires.

The March edition of the ECB MonthlyReport is also set to cross the wires. Median economicgrowth expectations for the Eurozone have been revised higher onlymodestly to reflect positive developments on the sovereign riskfront since the first 3-year LTRO in December and continue to callfor a recession in 2012. This means traders will be on the lookoutfor clues about future stimulus efforts, with any clues alluding torate cuts or additional nonstandard easing measures in the pipelinelikely to apply significant selling pressure on the Euro .

The Japanese Yen pushed aggressively lower overnight, sliding0.5 percent on average against its leading counterparts to hit thelowest level in eight months. The move likely followed anothersharp jump in short-term US yields. The 12-month lending rate roseto 19.8bps, the highest since late July 2011. As illustrated in ourweekly fundamental trends monitor , the Yen has recently begun to reclaim itshistorically strong relationship with Treasury yields as supportiveUS economic data weighed against prospects for a third round of Fedquantitative easing (QE3).

Asia Session : What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

21:00

NZD

ANZ NZ Job Ads (MoM) (FEB)

5.3%

-

-1.8% (R+)

21:30

NZD

Business NZ PMI (FEB)

57.7

-

50.8 (R+)

0:00

NZD

ANZ Consumer Confidence Index (MAR)

110.2

-

113.3

0:00

NZD

ANZ Consumer Confidence (MoM) (MAR)

-2.7%

-

-2.4%

0:00

AUD

Consumer Inflation Expectation (MAR)

2.7%

-

2.5%

0:30

AUD

RBA Board Bulletin - 1Q 2012

-

-

-

0:30

AUD

New Motor Vehicle Sales (MoM) (FEB)

0.0%

-

1.2% (R-)

0:30

AUD

New Motor Vehicle Sales (YoY) (FEB)

1.7%

-

2.5% (R-)

0:30

AUD

RBA FX Transactions (A$) (FEB)

372M

-

383M

1:52

CNY

Actual FDI (YoY) (FEB)

-0.9%

14.6%

-0.3%

4:00

JPY

Tokyo Condominium Sales (YoY) (FEB)

13.0%

-

32.6%

E uro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:45

CHF

SECO March 2012 Economic Forecasts

-

-

Medium

7:00

EUR

EU 25 New Car Registrations (FEB)

-

-7.1%

Low

8:30

CHF

Swiss National Bank Rate Decision

0.00%

0.00%

High

9:00

EUR

ECB Publishes March Monthly Report

-

-

High

9:30

EUR

Italian General Government Debt (JAN)

-

1897.9B

Medium

10:00

EUR

Euro-Zone Employment (QoQ) (4Q)

-

-0.1%

Low

10:00

EUR

Euro-Zone Employment (YoY) (4Q)

-

0.2%

Low

10:00

EUR

Euro-Zone Labor Costs (YoY) (4Q)

2.3%

2.7%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2999

1.3123

GBPUSD

1.5596

1.5730

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya , e-mail ispivak@dailyfx.com . Follow Ilya on Twitter at @IlyaSpivak

To be added to Ilya 's e-mail distribution list, send a note with subject line "Distribution List" to ispivak@dailyfx.com
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2012/03/15/FOREX_Franc_May_Rise_on_SNB_Rate_Decision_Euro_Eyeing_ECB_Report.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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