Daily FX Market Outlook by AceTrader-7-9-2011

Market Review – 06/09/2011 21:59 GMT

Franc plunges broadly as SNB draws line on eur/chf

The Swiss franc tumbled broadly on Tuesday as the Swiss National Bank stated that it would no longer accept a strong franc and prepared to buy foreign currencies in unlimited quantities to maintain its goal of a minimum exchange rate of CHF 1.2000 per euro.

The greenback rallied from 0.7843 to 0.8573 vs the Swiss franc due to SNB’s shock decision to fix eur/chf rate at 1.2000. Although dollar retreated to 0.8439 on profit-taking, renewed buying pushed the pair to session intra-day high at 0.8626 in NY afternoon. Eur/chf surged sharply from 1.1022 to 1.2190, the biggest one-day move in history.  
Although the single currency edged lower to 1.4038 at Asian midday, price rallied briefly to a high of 1.4281 on active cross buying of eur vs chf but pared its early gain to 1.4028 on risk aversion due to the worries about eurozone debt crisis. Despite euro’s recovery to 1.4090 after the release of stronger-than-expected US ISM non-manufacturing data (53.3 vs forecast of 51.0), renewed selling sent the pair to session low at 1.3973 in NY morning before stabilising.  
The single currency was pressured by the sharp fall in U.S. and European stock markets. DJI once tumbled by 300 points but eventually pared some of its early losses and closed the day at 11139.30, down by 100.96 or 0.90%. CAC-40 and DAX tanked by 1.13% and 1.00% respectively.  
Versus the Japanese yen, the greenback rallied above 77.00 level to 77.69 in the wake of the SNB’s decision but the pair retreated sharply to 77.00 in European session before staging a strong rebound to 77.58. Despite dollar’s retreat to 77.08 after the release of U.S. ISM non-manufacturing data, renewed buying above 77.00 lifted the pair to an intra-day high at 77.72 on dollar’s broad-based buying in NY afternoon.  
Although the British pound rose in tandem with euro from 1.6066 to 1.6207 on the SNB news, selling interest pressured the pair to an intra-day low of 1.5921 on broad-based buying of dollar in NY morning  
Data to be released on Wednesday include:  
U.K. BRC Shop Price Index m/m (Aug), Halifax hse prices, Industrial prod’n, Manufacturing prod’n, Australia GDP, Japan BOJ rate decision,Leading indicators, Germany Industrial prod’n, Canada BoC rate decision, Ivey PMI.