Switzerland Interest Rates Reduced

Published on in Foreign Exchange News by

Foreign Exchange Overnight/Morning Ranges:

Rates EUR/USD 1.4142-1.4344

Rates GBP/USD 1.6250-1.6408

Rates GBP/EUR 1.1417-1.1500

The Swiss National Bank cut its target rate to ‘as close to zero as possible’ in a bid to weaken the Swiss franc currency spurred by ongoing problems in both the US and the eurozone.

The Swiss National Bank intervention was due to the biggest one-day gain for the CHF against the euro since the establishment of the single currency.

The CHF lost over 2.5% in value as the Swiss National Bank stated the CHF is` over valued’ and that rates would be lowered to between 0%-0.25%.

In a statement released today, the bank said the currency was ‘massively overvalued’ and revealed that it would significantly increase the supply of francs to the money market over the next few days.

‘If you look at the fundamentals the Swiss franc seems strongly overvalued to most currencies. There are short term influences affecting the price, mostly the weakness in the eurozone and now the US.’

‘If you ask Swiss business owners, they are suffering a lot, especially the exporters – already half of the export machinery and electric industry is already in the red, as most of them are exporting to Germany and France. It is eroding their margins.’

The market is forcing these European countries to get their financial houses in order.

Stock markets slumped again yesterday as U.S. consumer demand showed signs of weakening. Moody’s and Fitch ratings agencies affirmed the AAA credit rating of the U.S. for the time being, after the deal on the raising of the U.S. budget ceiling was signed off. There are still further steps needed to be taken in order to reduce the budget deficit over time.

Investor mood remains fragile, not helping is the fact that Italian and Spanish government borrowing costs rose yesterday, as a result the Euro was sold overnight but has pulled back its losses this morning. Italy’s debt issues raise fears of further Euro Zone contagion. Sterling held onto its gains after well documented press comments that the U.K. is now viewed as a `safe haven’ backed by the austerity plans which have been in place for period. Both the Swiss Franc and gold made further record gains. H

EUR/USD currently 1.4292. Support 1.4200, resistance 1.4500.

GBP/USD currently 1.6384. Support 1.6300, resistance 1.6600.

GBP/EUR currently 1.1460. Support 1.1350, resistance 1.1600.


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