Forexpros – The euro trimmed gains against the Swiss franc on Thursday, after briefly touching a five-month high, amid speculation that the Swiss National Bank is looking at lifting its minimum exchange rate cap from 1.20 to 1.30 per euro.
EUR/CHF pulled back from 1.2426, its highest since May 24 to hit 1.2329 during European morning trade, up just 0.05% over the day.
The pair was likely to find support at 1.2214, Wednesday’s low and resistance at 1.2578, the high of May 18.
The Swissie came under pressure earlier after a report showed that the SNB’s currency holdings rose to a record last month after the bank imposed a minimum exchange rate target of 1.20 against the euro on September 6th.
The report underlined the bank’s determination to defend the exchange rate cap in order to reduce the risk of deflation and recession.
But sentiment on the euro remained cautious ahead of a rate-setting meeting by the European Central Bank later in the day.
The central bank was widely expected to leave rates unchanged at 1.5%, amid concerns over consistently high inflation, despite calls for a rate cut to support faltering growth in the single currency bloc.
Earlier in the day, official data showed that German factory orders dropped unexpectedly in August; down for the second straight month, adding to concerns that the financial crisis in the euro zone is creating a drag on growth.
Elsewhere, the euro was almost unchanged against the U.S. dollar, with EUR/USD easing up 0.03% to hit 1.3352.
Also Thursday, official data showed that Swiss consumer price inflation rose 0.3% in September, reversing the same drop a month earlier and above the expected 0.1% increase.
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