Forexpros – The U.S. dollar turned lower against the Swiss franc on Wednesday, as market sentiment was bolstered by remarks from senior European Central Bank policymaker Ewald Nowotny.
USD/CHF pulled back from 0.9964, the session high, to hit 0.9896 during European morning trade, shedding 0.61%.
The pair was likely to find support at 0.9776, the low of July 20 and resistance at 0.9964, the session high.
ECB Governing Council member Nowotny said that there were some arguments in favor of giving the euro zone’s bailout fund, the European Stability Mechanism, a banking license, which would increase its firepower to fight the debt crisis in the euro zone.
But investors remained cautious as the yield on Spanish 10-year government bonds remained above the 7.50% level, beyond the 7% threshold widely considered unsustainable in the long run, fuelling concerns that a full-scale sovereign bailout is inevitable.
Meanwhile, weak economic data out of German and the U.K. indicated that Europe’s largest economies are being affected by the debt crisis in the region.
The German research institute Ifo said its Business Climate Index fell to 103.3 in July, the lowest level since June 2010, from a reading of 105.2 in June.
In the U.K., official data showed that the U.K. economy contracted the most since the first quarter of 2009 in the three months to June.
The Office for National Statistics said gross domestic product contracted by 0.7% in the second quarter, far more than the 0.2% contraction economists had forecast, extending Britain’s recession into a third quarter.
The Swissie was little changed against the euro, with EUR/CHF inching up 0.01% to 1.2010.
Later in the day, the U.S. was to publish official data on new home sales, as well as a report on crude oil stockpiles.
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