Tuesday during early deals, the Swiss franc showed mixed trading against its major counterparts. While the franc climbed to a 4-day high against the euro, it fell to a 6-day low against the pound. Against the yen and the dollar, the franc pared its Asian session gains during this time. The franc thus eased from a new multi-month high against the yen.
The Swiss franc dropped to a 6-day low of 1.6609 against the pound during early deals on Tuesday. If the franc moves down further, it may find support around the 1.678 level. At Monday's close, the pound-franc pair was quoted at 1.6392.
The Office for National Statistics said today that UK's annual inflation accelerated to 3.2% in February from 3% in January. Economists had expected consumer price inflation to slow to 2.6%. Month-on-month, consumer prices were up 0.9%, faster than a 0.3% rise expected by economists.
On a yearly basis, retail prices remained flat after rising 0.1% in January. Economists were looking for an annual fall of 0.7% in February. The retail price index, excluding mortgage interest payments climbed 2.5%, slightly faster than the 2.4% increase seen in January.
As the inflation remained more than one percentage point above the target, Bank of England Governor, Mervyn King wrote a further open letter to the Chancellor of the Exchequer. King expects sharp decline in CPI inflation since its peak in September to resume in the coming months.
The Swiss franc slipped against the dollar after hitting a high of 1.1212 at 2:40 am ET Tuesday. At present, the dollar-franc pair is trading at 1.1275, compared to yesterday's closing value of 1.1248. On the downside, 1.134 is seen as the next target level for the Swiss currency.
The Swiss franc jumped to a new multi-month high of 87.75 against the yen at 1:55 am ET Tuesday. Thereafter, the franc eased and the pair is currently quoted at 87.20 with 85.6 seen as the next likely target level. The franc-yen pair was worth 86.26 at yesterday's close.
The board members of the Bank of Japan suggested that the Japanese economy may begin to recover from the current recession in the second half of this year at the earliest, minutes from the February 18 and 19 monetary policy meeting revealed today.
The members also said that they might need to cut their view of Japan's long-term growth - especially since there was more demand than expected for BoJ funds. The board also said that an exit strategy was needed for the series of economic stimulus measures.
During early deals on Tuesday, the Swiss franc climbed to a 4-day high of 1.5245 against the euro. The next upside target level for the Swiss currency is seen at 1.515. The pair closed Monday's North American session at 1.5337.
The euro plunged after the German newspaper Bild reported today that German government forecast the largest Euro zone economy to shrink this year. The German government forecast the largest Euro zone economy to contract in the range of 4% to 4.5% this year, the German newspaper Bild reported Tuesday.
Yesterday, the Commerzbank AG had downwardly revised its forecast for the German economy, citing the recent collapse of order intake. The bank now expects the German economy to shrink 6%-7% this year versus an earlier forecast of 3%-4% contraction.
Meanwhile, the think tank IMK reportedly estimated real GDP to fall 5% in 2009.
The French February consumer spending and business confidence indicator for March, Euro-zone January current account and the manufacturing PMI report, which were also released today likely influenced the euro.
Across the Atlantic, today will be a busy day including a testimony on AIG from Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Timothy Geithner to the U.S. House Financial Services Committee.
AIG has come under severe attack for awarding multimillion-dollar bonuses to executives following a $180 billion bailout from the U.S. government.
Markets will also receive information on the Richmond region manufacturing sector. The Richmond Fed manufacturing index is expected to remain unchanged at -51 in March.
The Federal Housing Finance Agency will also release its house price index for January. House prices are expected to fall 0.9% against a 0.1% increase in December.
In the afternoon, James Bullard, President of the Federal Reserve Bank of St. Louis, will speak in London.
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