Daily Report: Swiss Franc Weakens on SNB Talk Again

Swiss Franc weakens broadly as the week starts on fresh speculation that SNB would raise the floor on EUR/CHF again. SNB President Hildebrand was quoted over the weekend that the franc is "still highly valued versus the euro at the current exchange rate" and the bank expects it to "weaken further over time". Hildebrand warned that if Franc doesn't weaken further, there would be "deflationary trends" and would "weigh strongly on the economy." Hildebrand also noted that the policy to implement a floor in EUR/CHF at 1.2 back in September was "crystal clear" and "credible". Hildebrand also noted the bank is "monitor the data" and will "take further measures" including raising the EUR/CHF floor. EUR/CHF is back trading above 1.23 level for the moment.

Euro is steadily in range after Greek PM Papandreou sealed a deal with opposition leader Samaras on Sunday on a new coalition government. A new government would be announced this week after decision who will be the leader and there will be another confidence vote. February 19 would remain the date for elections. The resolution in political turmoil in Greece should help secure the next tranche of bailout fund for the country to avoid bankruptcy in December. Meanwhile, focus is shifting to Italy where PM Berlusconi will face a parliamentary vote over public finances on Tuesday, just after Italy agreed to be monitored by IMF for reforms during last week's G20 summit.

On the data front, Japan leading indicator dropped to 91.6 in September. Swiss unemployment rate was unchanged at 3.0% at October. Swiss CPI will be a main focus today and is expected to rise 0.3% mom, 0.2% yoy in October. Eurozone Sentix investor confidence is expected to drop to -20 in November, retail sales to fall 0.1% mom in September while Germany industrial production is expected to drop -0.6% mom in September.

GBP/CHF's sharp rally today affirms that case that pull back from 1.4440 is finished at 1.3808 after drawing support from 55 days EMA. Whole rebound from 1.1464 is likely resuming and break of 1.4440 will confirm and target 50% retracement of 1.8113 to 1.1464 at 1.5573 next. Nevertheless, we'd still expect strong resistance ahead of 1.5691 to limit upside to finish off the rebound from 1.1464.