Australia: Volatility was high in markets with the Swiss National Bank (SNB) leading the way when it announced it will impose a 1.20 minimum EUR/CHF target and in an accompanying statement, boldly declaring it is prepared to buy foreign currency in unlimited quantities.

The SNB said “The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development…The SNB is therefore aiming for a substantial and
sustained weakening of the Swiss franc. With immediate effect, it will not tolerate a EUR/CHF exchange rate below the minimum of CHF1.20.”

Strong words and to good effect, the market then turning to longer term considerations such as the new safe haven currencies of choice, and where the SNB would diversify its intervention proceeds. Locally, after keeping rates on hold at 4.75% yesterday, the RBA provided little hint of urgency to alter current policy settings, but they did suggest a policy move
in either direction, as they discussed their concern for the medium term inflationary outlook against the possibility that global weakness had the potential to soften this high inflation outlook.

Employment data will be very important. Today, Q2 GDP is released at 11.30am AEST and forecast to rise by about 0.7% q/q, after a fall of 1.2% q/q in Q1, with domestic demand reflecting weakness in household consumption and housing activity contrasting with Australia’s strong investment pipeline. RBA Governor Glenn Stevens is also due to deliver a speech in Perth.

Majors: The Swiss scenario is a fascinating one because if the CHF is no longer the safe-haven it once was, and with markets speculating the Bank of Japan will follow suit to push the JPY lower, where will global investors go for a safe-haven play? Scandinavian currencies were bid, and gold pushed to over US$1,920 / oz but as stated, equities were hit with concerns over the debt crisis in Europe weighing on markets.

Look at the events and data releases and hang on to your hat. We have the German Constitutional Court ruling on Germany’s participation in the Greek bailout and European Financial Stability Facility along with BoC and BoJ policy decisions today, Bernanke and Obama speeches as well as BoE and ECB rates decisions Thursday and the G7 meeting on Friday through Saturday. Oh, and the Chinese monthly data on Friday.

Economic Calendar
7 SEPT AUS RBA Gov Steven’s speaks in Perth
AUS GDP 2Q
JN BOJ Target Rate