Swiss Franc Strengthens On Rumors About Possible ESM Ruling Delay

Swiss Franc Strengthens On Rumors About Possible ESM Ruling Delay


The Swiss franc advanced against other major currencies in early European deals Tuesday amid market rumors of a possible delay of German court ruling on Europe's permanent bailout fund, or ESM.
Germany's top court is set to deliver a crucial judgment on the viability of the European Stability Mechanism, or ESM, and the fiscal pact on Wednesday, which would decide the fate of the EUR 500 billion bailout fund and the future course of the region's fight with the protracted debt crisis.
While politicians expressed confidence that the bailout fund will survive, many economists feel that the Federal Constitutional Court in Karlsruhe may delay the ruling or even impose some conditions, rather than rule against it. Both houses of the Parliament approved the ESM and the fiscal pact on June 29, with two-thirds of the German lawmakers voting in favor of it.
Although rumors of a ruling delay spread in the market, some reports from the region confirmed that German Federal Constitutional Court would give its ruling on the European Stability Mechanism and fiscal compact on tomorrow without any delay.
Meanwhile, Europe still has a "long way to go" in resolving its debt crisis, International Monetary Fund Deputy Managing Director Zhu Min reportedly said today.
"The crisis is not over," he was quoted as saying during a speech at the World Economic Forum in the Chinese port city of Tianjin. "We are still in the middle" and "there is a long way to go," he said. Zhu also urged Europe to keep faith in the single currency.
The franc hit more than a 1-month high of 1.5089 versus pound and more than a 2-month high of 83.10 against the yen with 1.50 and 83.5, respectively seen as the next upside target levels. The franc closed Monday's trading at 1.5134 against the pound and 82.76 against the yen.
The franc also outperformed against the U.S. and European counterparts, advancing to a new 3-1/2-month high of 0.9417 and a 4-day high of 1.2063, respectively. If the franc rises further, it may target 0.935 against the greenback and 1.205 against the euro. At Monday's close, the greenback-franc and the euro-franc pairs were quoted at 0.9465 and 1.2075, respectively.
Germany's wholesale price inflation accelerated for the second consecutive month in August, data released by the Federal Statistical Office showed today. The wholesale price index increased 3.1 percent on an annual basis in August, faster than the 2 percent growth seen in July. In June and May, the index rose 1.1 percent and 1.7 percent, respectively.
Looking ahead, U.K. trade data for July is due for release.
The U.S. trade data for July is slated for release in the New York morning session.