Euro-Zone Campaign Begins
October 6th, 2009 Posted in Euro-Zone
Although the EUR lost ground last week, the currency managed to remain above its major support line and regained some of its losses in Monday’s trading. The European Central Bank (ECB) President, Jean-Claude Trichet, contributed to the EUR’s weakness when he said that a strong U.S Dollar is extremely important. Trichet’s rate decision and a number of European releases will be shaping the direction of the EUR this week
The Euro-Zone currency was traded below $1.45 on Friday after the U.S. jobs report for September triggered a flurry of safe-haven Dollar buying. But the EUR’s quick bounce back suggested little appetite for further Dollar strength.
The EUR rose against the U.S Dollar and the Yen on buying by Japanese importers. Market players will watch commodity and share markets for the European unit’s outlook as the EUR is one of the most sensitive units to players’ risk tolerance.
The European currency was also buoyed by Ireland’s overwhelming approval of an agreement to overhaul the European Union’s decision-making process in Friday’s referendum.
Overall, the Forex market was range bounding as major economic events lined up this week, including the G7 meeting and the ECB monetary policy decisions.
Swiss Franc
The Swiss franc, meanwhile, remained on the back-foot against the EUR; having dropped the previous day on speculation that the Swiss National Bank (SNB) may have intervened to weaken its currency. The Franc weakened 0.4% vs. the EUR on speculation the SNB had intervened in the market to check the currency’s gain.
The last time the Swiss franc fell on speculation, and the SNB intervened in foreign-exchange markets, was on Sept. 10, when it dropped as much as 0.3% against the EUR. The SNB started selling the franc on 12 March to prevent it from appreciating. Since 11 March, it has fallen more than 2.5% against the EUR, having risen more than 7% in the previous 6 months.
By holding back the Swiss franc, policymakers are trying to prevent deflation from worsening the steepest recession since 1992 and restore investor confidence. The CHF may weaken further versus the common European currency on SNB comments made by policymakers who are said to be acting “with full force” in order to avoid an appreciation of the Franc against the EUR.
Against the U.S Dollar, however, the Swiss franc may climb 3%. The currency gained 3.3% against the Dollar this year even after the SNB began selling the franc on 12 March to keep it from strengthening, primarily against the EUR.
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Tags: Euro-Zone, European Single Currency, Swiss Franc Forecast
