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After opening higher in Asian trading the US dollar gave back its gains versus the majors. The notable mover of the day is the Swiss franc as the USD\/CHF reached a new all-time low while the safe-haven franc has made significant inroads versus the euro. Sterling is lower as traders anticipate tomorrow\u2019s Q2 UK GDP numbers.<\/p>\n
<\/span>US debt concerns are weighing on market sentiment in the forex market as traders move out of higher yielding currencies and into the safe-haven Swiss franc. As of last Thursday traders were eagerly seeking out higher yielding assets given prospects for debt resolutions<\/a> in both Europe and in the US. Over the weekend a breakdown in US debt negotiations have reduced expectations for a compromise but most are still expecting some sort of agreement to be stitched together to stave off a default in the world\u2019s largest economy. This can be inferred from both US Treasuries and equity prices. The US 10-year is stronger at 2.96% while European equities are little changed and S&P futures look to open only slightly lower. If markets were beginning to price in a default by the US pressures would likely be felt in both the fixed income and equity markets.<\/p>\n However, forex markets have responded otherwise with traders bidding the Swiss franc to a new all-time high versus the US dollar. Strong gains for the franc were also seen versus the euro after the EUR\/CHF failed to close above its 20-day moving average last week. Against sterling the franc has moved sharply as the GBP\/CHF encroaches on the pair\u2019s all-time low at 1.3037.<\/p>\n Prior to tomorrow\u2019s Q2 GDP report sterling has fallen versus the dollar but the GBP\/USD remains within its last two day\u2019s trading band. UK GDP is expected to slow with consensus expectations for a feeble 0.2% gain. Given the belt tightening in the UK budget and falling PMI numbers a decline in UK growth would not be too far-fetched. The pound could remain on its back foot should UK GDP come in below consensus forecasts, thus boosting the BOE\u2019s case for an ultra-loose monetary policy and an additional round of quantitative easing<\/a> despite a headline inflation rate of 4.2%. This may knock the GBP\/USD<\/a> lower back to the July 18th low at 1.6000, a level that coincides with a 61% retracement target from the July low to last week\u2019s high. Resistance comes in at 1.6370 from the previously broken trend line off of the May 2010 low. <\/p>\n