Investing.com - The euro regained some ground against the Swiss franc on Friday after posting its largest ever one day decline against the franc in the previous session and hit fresh 12-year lows against the dollar amid prospects for monetary easing by the European Central Bank as early as this week.
The euro posted its largest ever single-day decline against the Swiss franc on Thursday after the Swiss National Bank abandoned its 1.20 per euro exchange rate cap that it imposed in September 2011.
SNB Chairman Thomas Jordan said Thursday the cap had “protected the Swiss economy from serious harm” but added that maintaining the policy was not “sustainable or sensible in the long term.”
“The euro has depreciated considerably against the U.S. dollar and this, in turn, has caused the Swiss franc to weaken against the U.S. dollar. In these circumstances, the SNB concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified,” the central bank said.
The central bank also cut interest rates deeper into negative territory, a move intended to dissuade investors from buying the franc.
The diverging monetary policy stance between the Federal Reserve, which is poised to raise interest rates and central banks in Europe and Japan, has seen the dollar strengthen broadly in recent months.
The surprise move indicated that the SNB is anticipating that the ECB will implement quantitative easing measures at its upcoming meeting on Thursday, in an attempt to spur inflation and growth in the euro area.
An interim ruling last Wednesday, which is likely to be accepted by the European Court of Justice, said the ECB was free to pursue a bond purchasing program without legal challenge.
EUR/CHF was trading at 0.9930 late Friday, up 1.75% for the day after falling to all-time lows of 0.8696 on Thursday. The pair still ended the week with losses of more than 17%.
USD/CHF was up 2.25% to 0.8586 late Friday, having recovered from the lows of 0.7360 struck in the previous session. The franc still ended the week with gains of 15% against the dollar.
EUR/USD was down 0.55% at 1.1567 in late trade on Friday, after falling to lows of 1.1461 earlier in the day, the weakest since November 2003.
In the week ahead, investors will be focusing on Thursday’s outcome of the ECB’s policy meeting and the banks post policy meeting press conference will be closely watched.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, January 19
Switzerland is to release data on producer price inflation.
In the euro zone, Germany’s Bundesbank is to publish its monthly report.
U.S. markets will remain closed for the Martin Luther King Day holiday.
Tuesday, January 20
The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.
Wednesday, January 21
The U.S. is to release data on building permits and housing starts.
Thursday, January 22
The ECB is to announce its benchmark interest rate. The rate announcement will be followed by a post-policy meeting press conference with President Mario Draghi.
The U.S. is to release data on initial jobless claims.
Friday, January 23
The euro zone is to publish preliminary data on private sector activity, while Germany and France are to also to publish data on private sector growth.
The U.S. is to round up the week with preliminary data on manufacturing activity and a private sector report on existing home sales.