The EUR/CHF continues the tight range trading yet despite the good news for the euro on Thursday and the positive sentiment in the market the franc retains the upper hand affected still by Hildebrand’s resignation.
The euro generally was positive on Thursday and especially versus the dollar after Draghi said the ECB’s decision to hold the monetary policy was unanimous and despite the downside risk over the outlook and weak growth signals there are tentative signs of stability. Draghi also supported the euro by avoiding signals for more easing and also saying that the ongoing liquidity operations are helping calm the market and said the three-year loan helped in supporting banks and supporting market functionality and downplayed the record rise in overnight deposits at the ECB which further supported the euro.
More positive news was from Spain and Italy after the strong auctions. Both nations saw strong demand and a drop in borrowing costs that eased the fears with the start of the year.
On Thursday Spain sold double its target raising 10 billion euros as costs fell while Italy also saw borrowing costs fall sharply as it raised its targeted 12 billion euros.
With the end of the week more debt sale is scheduled from Italy on Friday yet generally the tension eased after the strong demand and appetite for risk seen at the Thursday auction which also was met by a drop in yields and that will limit the scope for strong euro losses at the end of the week as the sentiment generally stabilizes.
Nevertheless, with all the support to the euro Friday might still be about the franc for the EUR/CHF investors fear the empty seat at the SNB to have its toll on the bank’s fight against the franc’s appreciation and the 1.20 cap commitment, especially as so far the Finance Minister Eveline Widmer-Schlumpf said on Wednesday the process of finding a successor could take until May which is till now supporting franc gains as investors assess if the SNB is vulnerable to test its cap.
The euro zone will start the session at 10:00 GMT with the trade balance figures for November, where the seasonally adjusted trade surplus previous reading was 0.3 billion euros, while the non-seasonally adjusted surplus was 1.1 billion euros.
Auctions:
Italywill auction bonds at 10:00 GMT.
Originally posted here
