Investing.com - The dollar reached parity against the Swiss franc for the first time since December 2010 on Friday and rose to more than four-year highs against the euro after remarks by European Central Bank President Mario Draghi fuelled expectations for full blown quantitative easing.
In an interview with German financial newspaper Handelsblatt Draghi said the risk of the ECB not fulfilling its mandate of price stability is higher now than six months ago, signaling that it is moving closer to implementing quantitative easing measures.
The annual rate of euro zone inflation was just 0.3% in November, well below the ECB’s target of close to but just below 2%.
USD/CHF was up 0.83% to 1.0014 in late trade as weakness in the euro added to pressure on the Swiss National Bank to defend its 1.20 per euro exchange rate floor.
Switzerland’s central bank imposed the exchange rate floor in September 2011 to head off the threat of deflation and protect the country's exporters from a rapidly rising currency.
The SNB eased monetary policy in December, when it imposed negative interest rates on commercial bank deposits, in a bid to prevent the continued appreciation of the Swiss franc against the euro.
EUR/USD was down 0.85% to 1.2002 in late trade, the weakest level since early June 2010.
The single currency was also pressured lower after data showed that manufacturing activity in the euro area grew at a slower rate than initially estimated in December, adding to concerns over the outlook for fourth quarter growth.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, advanced 0.91% to nine-year peaks of 91.47 on Friday. The index rallied 12% in 2014, boosted by expectations that the Fed will raise interest rates in the coming year as the steady economic recovery in the U.S. continues.
EUR/CHF was almost unchanged at 1.2019 in late trade.
In the week ahead, investors will be turning their attention to Friday’s U.S. nonfarm payrolls report for further indications on the strength of the recovery in the labor market. Wednesday’s Federal Reserve meeting minutes and the SNB’s report on foreign currency reserves will also be closely watched.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday as there are no relevant events on this day.
Tuesday, January 6
The Institute of Supply Management is to release data on non-manufacturing activity.
Wednesday, January 7
The SNB is to publish a report on foreign currency reserves, which will be scrutinized for indications of the scale of the bank’s intervention in the foreign exchange market.
The U.S. is to release a report on ADP nonfarm payrolls, in addition to data on the trade balance.
Later Wednesday, the Federal Reserve is to publish the minutes of its most recent meeting.
Thursday, January 8
The U.S. is to produce its weekly report on initial jobless claims.
Friday, January 9
The U.S. is to round up the week with the closely watched nonfarm payrolls report, and data on wage growth.