Swiss Franc Expected To Weaken With Euro As Greek Fears Refuse To Dissipate

May 18, 2012 - Written by Toni Johnson

STORY LINK Swiss Franc Expected To Weaken With Euro As Greek Fears Refuse To Dissipate

The US Dollar started off the day on the front foot, sending the GBP USD exchange rate downwards towards the 1.5700 level. However, support for the Greenback has ebbed as the session progressed, as North American stocks broke into positive territory, thanks to the positive effect of Facebook’s IPO. Sterling also performed respectably on the day, in spite of no tier one UK data releases. The Pound appeared to benefit from the fact that, for the first day for several days, there were no set-piece speeches from British policy-makers; the words of Bank of England Governor Mervyn King and Prime Minister David Cameron have taken GBP lower over the last three sessions.

Meanwhile, European Commissioner Olli Rehn issued a message of solidarity to Greece earlier today when he confirmed that the European Union is willing to do all within its power to keep Greece in the eurozone. However, a German government spokeswoman went against the grain of Rehn’s comments when she stated that the eurozone’s premier economic power was ‘prepared for all Greek eventualities’. The euro has gained a limited amount of ground against the Greenback on the day, taking the EUR USD exchange rate as high as 1.2730 on the session. It appears possible that the market has now factored-in all of the bad news which has emanated from Greece into its pricing on the single currency for the time-being.

Elsewhere in Europe, the Swiss Franc continues to be dragged lower by the euro due to the Swiss National Bank’s maintenance of a minimum floor of 1.2000 on the EUR CHF exchange rate. This has seen the SNB flood the market with CHF reserves in recent weeks in order to keep the Franc as weak as the single currency. This means that the Franc is effectively shadowing the euro, so its prospects do not look rosy moving forward.

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