On Thursday trading, the U.S. dollar rose to 8-month high against the Swiss franc as fears in markets after Draghi’s announcements enhanced demand on the dollar as a refuge.
After announcing aid to banks, Draghi said he did mean that ECB would step up government bond purchases in his announcement last week as the ECB did not give a clear sign of strong bond purchase to support the economy.
Draghi also referred to downside risks form global economy and uncertainty to haunt the region’s outlook.
What added to worries is the downside revision to growth forecasts to range between 1.5% and 1.7% this year and to range between -0.4% and 1.0% next year.
Later in the day, eyes will be on the EU summit to see the ability of European leaders to change EU treaty to put stricter budget rules as well as discussing issues related to the European rescue fund expansion.
On the other hand, the franc remained weak on speculations the SNB would intervene again to boost the economy especially as the most recent data showed slowdown in growth along with the fall in inflation.
A report released on Tuesday showed that Swiss consumer prices dropped 0.5% from a year earlier, marking the sharpest drop since Oct. 2009, Finance Minister Eveline Widmer-Schlumpf said on Wednesday negative interest rates and capital controls “are issues which are being examined.”
Regarding fundamentals, the improvement inU.S.initial jobless claims which fell to 381,000 from the revised 404,000 did not have much impact on the pair’s movements which was mainly affected by the general sentiment.
On Friday, the week ends with the release ofU.S.trade balance, at 13:30 GMT, which is expected to show a narrowed deficit of $43.0 billion in Oct. from $43.1 billion deficit a month earlier. Thereafter, specifically at 14:55 GMT,UniversityofMichiganis estimated to rise to 65.0 in Dec. from 64.1 last month.
The data is expected to affect the pair due its importance, yet it is expected to be also affected by the general sentiment which is tracking the latest announcements in the EU summit.
Originally posted here
