The National Bank will continue to protest strongly against significant Swiss franc gains as it continues to battle deflation fears and a deepening recession. The franc has regained some composure since the massive declines following initial SNB intervention earlier in March, but the potential for gains looks very limited. There is likely to be strong Euro support close to 1.52 given the continuing intervention threat. Solid dollar support should also be seen on dips to 1.1140 against the franc.

Confidence in the Swiss economy will remain weak as the severe downturn continues. Data last week continued to record a sharp decline in exports. Ahead of the monthly business confidence survey on Friday, the KOF institute warned that it expected a deeper and longer recession than expected previously. It forecast a 2.4% GDP decline for 2009 and a further 0.3% decline for 2010

A lack of confidence in all the major currencies will continue to provide some degree of Swiss franc support by default, although the impact will be offset by a recovery in underlying risk appetite as global stocks continue to probe resistance levels.

Markets will continue to be very wary over the threat of intervention to weaken the franc if there are significant gains from current levels.