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Forex Market Update: Swiss Franc Crosses Pare Gains, Driven by Risk Aversion (Update)

The Swiss franc firmed up in to the European session, with gains coming against the euro and sterling ahead of today's key rate decisions from the BoE and the ECB. EUR-CHF traded back in to 1.5300 versus an Asian peak of 1.5381 and GBP-CHF reverted to the 1.7750 area against an Asian high of 1.7898. Both crosses are expected to trade defensively during the European morning, with appetite for risk hampered ahead of the policy announcements. Meanwhile, USD-CHF is marking time around 1.2100 after making a modest move higher in to the European open. Again, momentum in the dollar pairing is lacking, although low risk trading strategies should favor the dollar in the near-term. Elsewhere, comments from SNB's Roth on Wednesday did not have a significant impact on price action. He said that the Swiss economy probably escaped contraction in Q3, which was confirmed today after the release showed a flat outturn, but growth was revised down to 0.3% in Q2. Roth didn't offer anything to suggest another intermeeting cut is on the card, after he said that the SNB's cut on November 20th was to encourage a relaxing of the money market.

Meanwhile, the Japanese yen held steady within familiar ranges as volumes were limited ahead of today's rate decisions. USD-JPY remained within close proximity to 93.00 after testing both sides of the market in Asia. Option strikes are noted at 92.00, 92.60 and 93.00, which could leave the pair on a heavier footing, given that the balance of risk favors further JPY demand. The JPY crosses remain at the lower end of their recent range, with EUR-JPY close to its 117.26 intra-day low and GBP-JPY close to Asian lows of 135.95. The market is well positioned for a rate cut from the BoE and the ECB today, which may actually hamper further downside movement. Elsewhere, European equity market remains under pressure, which is also another supportive factor for JPY in quiet trade.