EUR/CHF Daily Fundamental Analysis for August 11, 2011

The EUR/CHF continued to trade with high volatility an in a tight range on Wednesday though off record low for the pair after the SNB took more measures to ease the franc’s gains which still did not prove sufficient.

The Swiss National Bank said in a statement that they will increase the supply of francs in the market and expand the sight deposits to 120 billion francs from 80 billion and also conduct foreign-exchange swap transactions to increase the liquidity, further measures to ease the strong currency rally that is adding more downside recovery on the economy.

The bank said the franc shows “massive overvaluation” which is why the bank stepped up the efforts to stem the gains, yet so far the franc is holding the gains against the euro on the evident jitters and fear over the outlook for the slowing growth and deepening debt crisis.

After all the measures taken by central banks in the past week, the sentiment remains fragile and investors have lost hope in the strength of the recovery and outlook for growth and ability for central banks and government to contain the crisis.

The volatility will prevail on Thursday and the choppy trading will remain evident with the mixed and fragile sentiment, especially with the lack of major data.

Eyes will be on the ECB will monthly report at 08:00 GMT and will include the details of the special liquidity operations and the extension of the money operations that Trichet announced last week when the bank left rates steady at 1.50% on hopes that it will cool the jitters which will surely pressure the pair higher if investors confidence improved in the ECB’s ability to contain the crisis.