Sterling is sharply down in European session following the release of much worse than expected retail sales report from UK. EUR/GBP jumps to as high as 0.8603 so far while GBP/USD dives through 1.62 level briefly. On the other hand, after initial post SNB kneejerk reaction, Swiss Franc strengthens across the board. The net result sees GBP/CHF tumbles sharply to as low as 1.7466. Dollar is lifted mildly but remains in range in general.

SNB left three mont libor target unchanged at 0.25% today and said it will take firm action to prevent an appreciation of the Swiss franc against the euro. The Swiss Franc initially spiked lower. However, Board member Thomas Jordan later said that the bank's strategy is flexible and “markets should not become used to a certain level of intervention.” Chairman Jean-Pierre Roth also said the asset and currency purchases have “achieved their objective” for now and appreciation against euro and currency volatility have eased. Swiss then reverses and rises sharply.

Retail sales in UK was much weaker than expected in May, falling -0.6% mom, breaking the two months winning streak. On a year ago basis, sales dropped -1.6%. This is noticeably worse than expectation of 0.3% mom rise and -0.4% yoy fall. Sterling is feeling the pressure across the board with GBP/USD pressing 1.62 level while GBP/JPY is also pressing 155.

Looking at GBP/CHF, note that choppy rise from 1.5111 is treated as consolidation in the larger fall from 07 high of 2.4964 and should have met the target of 1.7425/8966 resistance zone already. While today's fall is is sharp, there is not enough evidence that it has topped out yet. Focus will turn to 1.7194 support and break there will strongly suggest that such correction has completed. On the other hand, while another rise cannot be ruled out for the moment, focus should remain on reversal signal as GBP/CHF stays in mentioned 1.7425/8966 resistance zone.

Looking ahead, in US session, Canadian CPI will be the main focus which is expected to show rise 0.3% mom, fall -0.2% yoy in May. Core CPI is expected to moderate further from 1.8% yoy to 1.6% yoy. Initial jobless claims in US is expected to remain above 600k level. Philly Fed survey is expected to improve from -22.6 to -17 in Jun. However, note that Empire State Manufacturing index disappointed the markets on Monday by falling to -9.4 in Jun which triggered selloff in stocks and buying in dollar. Beware of the same development in the release of Philly Fed survey today.