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Forex Flash: Could Swiss-style rate floor be installed for AUD/NZD? – UBS

FXstreet.com (Barcelona) - RBNZ Governor Wheeler confirmed last week that the central bank has intervened by selling New Zealand dollars. It is probably no coincidence that the AUD/NZD broke below 1.2000 the day before the remarks were made, trading below for the first time since October 2009.

Moreover, the 1.2000 level has significance for another cross too of course. The Swiss National Bank has already drawn a line in the sand there in EUR/CHF and, given the superficial parallels, some have wondered if a similar floor could be installed under the AUD/NZD.

According to Gareth Berry, a Research Analyst at UBS, “We doubt it for several reasons, including Swiss inflation, which has languished in negative territory since October 2011.” With the policy rate already at the zero bound, targeting the exchange rate was one of the last remaining policy options. By contrast, New Zealand's inflation rate of +0.9% YoY threatens to climb as the post earthquake reconstruction effort accelerates. “Even if it were to slip further, there would be plenty room for rate cuts before resorting to FX targeting.” Berry adds.

Switzerland: Annual Real Retail Sales fall against expectations in March

On an annual basis Swiss Real Retail Sales decreased 0.9% in March, compared with 2.3% growth in February, according to data released today by the Swiss Federal Statistical Office. Market consensus pointed to a 0.8% rise.
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Forex: EUR/USD pares losses to trade at 1.2962/64

The EUR/USD has recently pared its gains Monday, falling nearly 25-pips off the 1.2990 handle to test the crossover in negative territory. With the recent weakness afflicting the pair, it now trades at 1.2962/64 at the time of writing, incurring a tepid loss of -0.04% off its opening during European trading.
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