Friday July 29, 2005 - 11:24:10 GMT
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Euro Slips But KOF Helps the Swissie
The euro gave up the 1.2100 level in overnight session, pressured more by profit taking rather than any weak economic data out of the Euro-zone while the Swiss franc was helped by surprisingly strong results from the KOF LEI report – Switzerland’s most important monthly statistic. The KOF printed at 57 way above the 50 boom/bust level and significantly higher than the 48 expected. Additionally, prior month’s data was revised to 55 from original value of 46. The KOF now stands at the highs of the year and suggests that Switzerland’s economic slowdown may be coming to an end. While analysts do not expect SNB to raise rates during its meeting in September, a rate hike at SNB’ s following meeting in December is now s distinct possibility. The franc with its ultra low 75bp interest rates has been one of the favorite funding instruments for carry trade speculators which explains some of its weakness over the past few months. Should SNB begin to tightening in December the franc is likely to firm as carry trade sell flows would ease.
Meanwhile, the euro retraced some of is gains over the past two days as market’s attention turns to US GDP data due 12:30 GMT. Expectations are for a gain of 3.5% vs. 3.8% the period prior. If the number does meet expectations it s will be the 13th consecutive quarter of 3%+ growth the best performance since 1986.
FX Spot Overnight
- EUR hovers near 1.2100
- JPY at 112.30 in tight range
- GBP holds the 7500 figure on positive consumer sentiment
- CHF at 2900 after KOF upside surprise
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