Even as the euro has strengthened against the dollar over the last week and a half is unable to carry that advanced to its fight against the Swiss franc. This week we test key support near 1.2060 that if breached would set up a big battle between the market and the SNB. The fact that the Greek debt negotiations have not found resolution continue to not see a resolution in the Greek debt negotiations, the CHF continues to be bid as a safe haven thereby reinforcing a fundamental bias for the Swiss franc against the euro in these conditions.

With an economy that is slowing and annual consumer inflation falling into negative territory the speculation around Thursday’s SNB interest rate decision is quite high. The options available to the SNB are to raise the EUR/CHF floor from 1.20, impose negative interest rates or other capital controls on foreign deposits, or to take a “wait and see” approach. We highlight these options as well as take a look at the USD/CHF and EUR/CHF as we have seen these 2 pairs diverge recently.

It has not been a good batch of data from the Swiss economy last week and to start this week. As a result the Swiss Franc should be pressured from a fundamental standpoint, especially against other safe havens like the USD and JPY. Let’s review the 4 crummy reports we gotten from Switzerland, showing a slowing economy. We also got some figures on how much it cost the SNB to intervene in markets over the previous quarter.

We saw a flurry of action in Swiss Franc pairs as it seems to SNB is directly intervening in markets again with the EUR/CHF pair climbing from 1.2062 to above 1.2170 in the span of a few minutes amid talk that the SNB would like to raise the EUR/CHF floor to 1.25 from 1.20. The GBP/CHF and USD/CHF pairs have followed in frank weakness. This move is likely a result of the Swiss government downgrading its forecast of GDP as a result of the very strong frank.