USD/CHF Daily Fundamental Analysis for August 9, 2011

On Monday, the dollar fell to record low versus the Swiss franc after S&P cut toU.S.sovereign rating by one step to AA+, losing its top rating for the firs time since 1941.  Yet, the dollar managed to rebound from its lowest record on expected actions from the SNB to halt the franc’s advance.

Regarding fundamentals fromSwitzerland, unemployment remained at its lowest level in 2 1/2 years in July at 3%, marking the Swiss economy is showing progress which may encourage the SNB to take more monetary measures to stop the franc’s appreciation.

Meanwhile, the SNB is facing a daunting challenge as investors still resort to the franc as a safe haven currency amid the undergoing tensions. However, with the purchase of the ECB to Italian and Spanish bonds on Monday, which pushed their record-high yields down, thereby easing some of the tensions stemming from the escalating debt woes, demand on the franc, which benefited from the escalation of debt crisis, retreated.  

On Tuesday, eyes will  be on the FOMC rate decision , due 18:15 GMT, in case of any surprise from the Fed that may announce a third round of stimulus to reinvigorate growth that started to slowdown after the end of QE2 in June, especially after the monetary interventions seen last week by the SNB, BoJ and ECB. Yet expectation refer to no change on monetary policy as the Fed will probably keep interest rate unchanged and will not announce new stimulus.