SNB Steady CHF Hit

The Swiss franc is getting crushed. The SNB kept its three-month LIBOR target at 25 bp. It revised up this year's growth forecast to 2.5% from 2.0%. The government's forecast is a bit higher at 2.7%. The inflation forecast was cut to 0.7% from 0.9%, but even more telling was next year's inflation forecast was cut to 0.3% from 1.0%. Indeed it warns that inflation can slip into negative territory in early 2011. It says the economic recovery is not yet sustainable and this may dampen ideas of a hike before the end of the year. It does recognize the long-term risks posed by the low interest rates that are appropriate now. The dollar was down at CHF0.009933 on Tuesday and now is trying to convincingly move through the CHF1.01 level. Additional resistance is seen in the CHF1.0140-60 area. The euro is rallying more than 1% against the Swiss franc and the 5 and 20 day moving averages are abot to corss to the upside for the first time since mid-Aug. Lastly, note that the pullback in the Swiss franc may help support Eastern European currencies, especially HUF and PLN.
SNB Steady CHF Hit SNB Steady CHF Hit Reviewed by Marc Chandler on September 16, 2010 Rating: 5
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