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Forex Flash: SNB to raise floor target for EUR/CHF to 1.2500? – UBS

FXstreet.com (Barcelona) - The Swiss franc has weakened sharply this week. Indeed, the EUR/CHF has jumped from levels just above the Swiss National Bank's 'minimum' floor of 1.20 to above 1.23 while USD/CHF has appreciated back towards 0.95 the figure.

According to the UBS Research Team, “There has been speculation that the SNB would raise its floor target to 1.25 for the EUR/CHF. We believe the central bank has no intention of 'fine-tuning' its exchange rate policy given continuing deflation in Switzerland, uncertainty about the Eurozone's debt crisis and the risks that such a move would invite international criticism.” Instead the weakness of the franc may reflect Germany's slowdown. This week's German PMI and IFO business conditions data were all worse than expected.

The franc is a shadow currency for Germany. As a result changes in German economic activity influence Swiss activity too. This is shown by the close fit between German and Swiss PMI data. In addition, Switzerland has similarly strong fiscal and trade positions as Germany does. “Thus the franc acts as a safe haven – just as the Deutsche mark did before the advent of the euro in 1999.” they add.

Forex Flash: UK GDP to “triple-dip” or not to “triple-dip” – TD Securities

TD Securities point to the UK Q1 GDP as the highlight of the day as it will determine whether the UK avoided the “triple-dip” recession tag or not: “By sector, construction spending is likely to be a big drag, with Jan-Feb data hinting at the sector subtracting about -0.2ppts from Q1 GDP. And with the weak start to the year, we don’t expect significant quarterly growth from any other major sectors as by our tracking they so far suggest only a marginal contribution”, wrote analyst Annette Beacher, expecting a -0.1 to -0.2% contraction despite consensus of +0.1% Q/Q, “which means the media will be focused squarely on dreaming up the most sensationalistic ‘triple-dip’ headlines”.
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Forex: EUR/CHF eases off highs to 1.2334/38

The EUR/CHF has been trading sideways in recent minutes during European trading, despite an earlier jump that sent the pair as high as 1.2347 (session high) Thursday. In these moments however, the cross has eased slightly to 1.2334/38, notching a modest gain of +0.06% on the day.
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