• US PPI rise 0.2%’ ex-food and energy up 0.4%
  • Obama announces plan to announce a plan in September to cut more than $1.5 trln in spending over next ten years
  • Philly Fed’s Plosser: FOMC decision was inappropriate, an overreaction
  • ECB bought more Italian bonds today: Bloomberg
  • Dutch fin min says opposed to transaction tax ; political union not necessary for monetary and fiscal union; discipline is
  • Swiss government: Franc level up to SNB; capital controls and/or negative rates would require government approval
  • Barclays: First UK hike now seen in Sept 2012 from May 2012
  • Fed’s Fisher berates Congress on fiscal management; more easing would create enormous risks
  • S&P 500 closes up 0.1% at 1194
  • US 10-year note falls 7 bp in yield to 2.155%
  • Oil rises $0.78 to $87.42; gold rises $6 to $1791

It was quite an active morning as the market adjusted to the latest steps from the SNB. Initially the moves to add additional liquidity to the money markets were seen as too little too late but a move by the SNB to borrow franc on the forward market showed traders that the central bank was serious. Rates have begun to turn negative in the interest rate swap market and may turn negative in the cash markets before long, some fear.

EUR/USD saw heavy buying from sovereign names in the 1.4430 are in London (after bouncing from 1.4330 levels already…) which helped spark a move as high as 1.4518. That level is the 61.8% retracement of the 1.4940/1.3837 range. We pulled back rapidly from that level and never retested it for the balance of the session.

EUR/CHF and USD/CHF rallied late in Europe on an announcement that the Swiss government would hold a press conference. EUR/CHF reached 1.1555 and USD/CHF 0.7975 in anticipation of a major announcement to weaken the franc. Instead, the government punted the franc problem back to the SNB and made some minor moves to help the tourism and export sectors. EUR/CHF slumped a centime on the news and USD/CHF slipped to 0.7865. It ends the day at 0.7900. A close above 0.800 is needed to give the rebound fresh upside momentum in near-term.

Commodity currencies were stronger on the day as equity markets traded in (relatively) subdued fashion. Hopes for more QE from the Fed are pushing money back into assets that can be dropped on one’s foot and the currencies that love them.. AUD tested 1.0600 and closes at 1.0550.