Earlier this week the Swiss Franc (CHF) experienced volatility after a local media report inferred that the Swiss National Bank (SNB) is unofficially targeting a ‘currency corridor’ after scrapping its 1.20 cap with the Euro in January.
The report indicated that the central bank is attempting to keep the Franc trading between 1.05 and 1.10 against the Euro and is intervening in the currency market in order to achieve this.
While the SNB declined to comment on the situation, sight deposit data supported the argument that the central bank has sold Francs in order to control the currency’s value.
The European currency fell to a two-week low against both the US Dollar and Euro as a result of the corridor talk.
However, if the SNB was attempting to maintain a currency corridor, it failed in the attempt on Monday as the EUR/CHF fell beyond the 1.05 level in response to developments in the Greek debt situation.
The ongoing discussions between the Greek government and the European Central Bank will be keeping the heat on the Euro in the weeks ahead, with declining ‘Grexit’ concerns being Euro supportive and any discord between officials weighing on the common currency.
Since the beginning of the week, the Franc has fallen back to trade in the region of 1.0582 against the Euro, having shed 0.8% against its European peer. The Franc also fell by more than 0.6% against the Pound on Thursday.
Earlier today, data compiled by Switzerland’s State Secretariat for Economic Affairs (SECO) revealed that consumer confidence in the nation climbed prior to the SNB’s decision to remove its cap with the Euro on January 15
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and declined after the currency peg was removed.
SECO stated; ‘Large differences of the answers between the two supperiods (before and from 15. January onwards) can be observed, in particular in the expectations concerning future economic activity and future price development.’
‘The assessment of the current period as being more or less conducive to making major purchases was also influenced by the SNB’s decision as were the answers concerning the labour market (job security and expected increase in unemployment), albeit to a lesser extent. Nevertheless, the events of mid-January do not seem to have affected either the perception of the household financial situation or the current or future possibilities for savings.’
The Pound Sterling to Swiss Franc (GBP/CHF) exchange rate is currently trading in the region of 1.4153. Further movement in the pairing can be expected to occur tomorrow following the release of Swiss retail sales figures and the UK’s trade balance report. Investors with an interest in the EUR/CHF pairing will be keeping an eye on Germany’s industrial production numbers.