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Franc Strengthens After SNB Keeps Expansionary Monetary Policy Unchanged

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The Swiss franc spiked higher against its key counterparts in early European deals on Thursday, after the Swiss National Bank left its expansionary monetary policy unchanged and pledged to intervene in forex market as required to contain the excessive strength of the currency arising from political uncertainty and trade tensions.

In the monetary policy assessment, the SNB said it is introducing the SNB policy rate, replacing the three-month Libor, saying the future of the Libor is not guaranteed.

Interest on sight deposits held by banks at the SNB currently corresponds to the SNB policy rate and remains at -0.75 percent. The interest on sight deposits was unchanged at -0.75 percent.

The central bank cautioned that the Swiss franc is still highly valued.

The bank said the negative interest rate and the willingness to intervene in the foreign exchange market as necessary remain essential in order to keep the attractiveness of Swiss franc investments low and thus ease pressure on the currency.

The Swiss economy is forecast to log a moderate growth this year as weakening global activity and considerable uncertainty is weighing on foreign trade and investment, according to a report by the State Secretariat for Economic Affairs.

In the summer forecast, the expert group of SECO upgraded the 2019 growth projection to 1.2 percent from 1.1 percent. The outlook for 2020 was retained at 1.7 percent.

The currency rose against its most major counterparts in the Asian session amid safe-haven status, as lingering concerns about the U.S.-China trade war and its impact on global growth dampened risk sentiment.

The franc added 0.3 percent to a 2-day high of 1.1218 against the euro, following a decline to 1.1250 seen at 3:00 am ET. The pair was quoted at 1.1237 when it closed deals on Wednesday. Further uptrend may take the franc to a resistance around the 1.09 level.

Final data from Destatis showed that Germany's consumer price inflation moderated as estimated in May from a five-month high on air tickets and holiday packages.

Consumer price inflation eased to 1.4 percent from 2 percent in April.

The Swiss currency was 0.4 percent higher at a 2-day high of 1.2586 versus the pound, after declining to 1.2635 at 9:00 pm ET. The franc was valued at 1.2632 a euro at yesterday's close. Next key resistance for the franc is seen around the 1.24 mark.

Survey by the Royal Institution of Chartered Surveyors showed that UK house prices increased in May as the delay in Brexit helped to curb continuous fall in prices.

The house price balance rose more-than-expected to -10 percent in May from -22 percent in previous month. The balance was forecast to rise marginally to -21 percent.

Bouncing off from a weekly low of 0.9960 touched at 3:00 am ET, the franc edged higher by 0.3 percent to 0.9927 against the greenback following the decision. The franc was trading at 0.9955 per pound at Wednesday's New York session close. The franc is likely to face resistance around the 0.96 level, should it rallies again.

The franc was modestly higher at 109.07 against the Japanese yen, up by 0.3 percent from a 1-week low of 108.74 recorded at 3:00 am ET. The franc-yen pair had ended Wednesday's trading at 108.98. Extension of the franc's upward trading is likely to lead it to a resistance around the 111.00 level.

Looking ahead, the U.S. import and export prices for May and weekly jobless claims for the week ended June 8 will be out in the New York session.

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