"It will remain as it is for the time being. The Swiss National Bank is in the comfort zone, given the weak inflation rate in the euro area. That speaks for a stronger franc."
- Cornelia Luchsinger, an economist at Zuercher Kantonalbank
The SNB should start keeping an eye on the EUR/CHF more carefully, as after hitting a high of 1.2394 on January 8, the pair began its downside movement to 1.2200 level. The Euro was losing ground versus the Swiss Franc amid falling inflation in the 18-nation economy while stronger-than-expected manufacturing output in the Alpine country pushed the pair even lower.
On Monday, a report from Credit Suisse and Procure.ch showed the Swiss manufacturing index stayed in the positive territory, inching higher to 56.1 points in January compared with an upwardly revised 55 a month earlier. The figure recovered from the lowest since June, when the gauge came in at 51.9. Moreover, the index moved higher above the crucial 50-point threshold, which separates expansion from contraction, for last 12 months, pointing to recovery in the Swiss economy boosted by the SNB's currency floor, which eased pressure on exporters, as well as the overall strengthening Eurozone's economy, the largest trading partner of Switzerland.
Improving domestic and global demand, as well as stronger manufacturing output are all bolstering the case Thursday's trade balance can surprise markets to the upside, pushing EUR/CHF up to the next strong support at 1.2198.
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