USD/CHF Daily Fundamental Analysis for August 11, 2011

On Wednesday, the pair rebounded slightly after the Swiss National Bank decided to increase the supply of liquidity in markets, raise sight deposits to 120 billion francs from 80 billion francs and adopt foreign-exchange swap transactions to reinforce liquidity.

The SNB insists on curbing the franc’s advance, which is hurting Swiss exporters, yet it is facing a hard mission as investors resort to the franc amid the undergoing tension and fears.  

It is clear that the SNB is ready to use any methods to halt the franc’s rally which “poses a threat to the development of the economy inSwitzerlandand has further increased the downside risks to price stability,” according to the SNB.

Thus, the pair is expected to continue its rebound with the SNB monetary tools used and as the dollar is facing downside pressure due the risks surrounding theU.S.economy which led to the downgrade ofU.S.top sovereign rating.

The Fed’s pledge to keep interest rate at its record low through mid-2013 and readiness to use a wide range of tools to boost recovery that slowed down could not ease the tensions in markets.    

On Thursday, at 12:30 GMT, the U.S economy will release trade balance report which is expected to show a narrowed deficit of $47.5 billion in June from $50.2 billion deficit a month earlier. At the same time, initial jobless claims for the week ended August 5 and continuing claims for the week ended July 30 will be available.

Further deterioration inU.S.data may increase fears in markets, especially after the S&P downgrade toU.S.rating.