By FX Empire.com
The EUR/CHF turned strongly lower on Wednesday despite comments from the SNB on readiness to act and worrying CPI figures that increased threats of deflations.
Markets are still frantic about the worsening crisis in the euro area and the political instability in Greece and Italy continued to weigh on the market, especially as yields on Italian bonds rallied to new records above the critical 7.0%.
The euro suffered the biggest pressure after LCH Clearnet SA increased the deposit margin on trading Italian bonds which sent the yields surging and intensified the jitters which resulted in a panic selling wave across the board and the demand on havens including the franc.
The pair is still above 1.20 and mainly above 1.22 areas and that is not alarming for the SNB yet as it’s above the floor set, yet the bank signaled the readiness to act against the franc gains and deflation threats that affect economic stability. The outlook remains worrisome for the euro and the pair has room to decline again yet will remain limited in light of the SNB pending action and readiness to act, yet for now the odds will not reverse strongly for the euro and the pair will continue the downside correction to cover the opening gap we talked of earlier.
The fears over the euro area will keep the franc favored for gains, yet as far as its steady above 1.20, and accordingly more volatility is expected. The end of the Greek political trouble at least and the announcement of the government that is expected anytime now might offer some relief for the euro, yet in general the outlook for the euro remains weak for now.
At 09:00 GMT the euro zone will join the session with the European Central Bank’s monthly report.
Originally posted here
