EUR/CHF Jumped Ahead of SNB, Fitch Downgraded UK Rating Outlook

EUR/CHF jumped sharply over night and is back trading above 1.21 level as markets are awaiting SNB rate decision. The bank is expected to leave rates unchanged and maintain it's pledge to keep the 1.2 EUR/CHF floor. SNB is still sticking to it's plan to name a new president in April. Swiss parliament voted to keep SNB's independence yesterday even though there were politicians calling for further effort from the bank to weaken the Swiss Franc. One Swiss Social Democrats urged EUR/CHF floor to be raised to 1.4 or higher. But we'd expect the floor to be unchanged at least before interim president Thomas Jordan takes up the role permanently. Hence, we'll treat the current jump in EUR/CHF with a cautious attitude and won't turn bullish from neutral before we see sustained trading above 1.2127 resistance.
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Fitch downgraded UK's credit rating outlook from "stable" to "negative" yesterday and noted that the country has "very limited fiscal space to absorb further adverse economic shocks in light of such elevated debt levels and a potentially weaker than currently forecast economic recovery." The AAA credit rating faces a 50% chance of downgrade over the next two years. Fitch specifically noted the "substantial" linkage between UK and Eurozone and the impact on intensification of Eurozone crisis on UK's "ability to meet its deficit reduction targets and place the debt to GDP ratio on a downward path in 2015-16." Sterling has little reaction to the news though.

Looking ahead, ECB will release it's monthly bulletin today while Eurozone employment data will also be featured. From US, a number of key economic data will be released. Empire State Manufacturing index is expected to drop to 17.4 in March while Philly Fed survey is expected to improve to 11. February PPI is expected to moderate sharply from 4.1% yoy to 3.1% yoy while core PPI is expected drop from 3.0% yoy to 2.9% yoy. Initial jobless claims is expected to drop back to 355k.