In a night of quiet, directionless trading marked by downward revision of UK GDP, the most interesting economic release of the night came out of Switzerland where the KOF index of leading indicators printed at 77 versus expectations of 70 - the best value in over 12 months. As we've noted in the past, tiny Switzerland has been the hidden growth story on the European continent as its'  export skewed economy has been the primary beneficiary of lower exchange rates.

Within the past month Switzerland saw both Retail Sales and Unemployment data surprise to the upside suggesting that the economic recovery in the country is strengthening despite the depressive effects of higher energy prices.  Finally, this past Sunday the Swiss voted in favor of extending a labor accord with the European Union - a move market deemed critical to future trade growth between Switzerland and the Euro-zone.  The currency however, much like Rodney Dangerfield, has gotten no respect for the past two weeks, falling against both the dollar and the euro. The recent decline in the Swissie can be directly linked to the use of the franc as the key funding currency for carry trades. With its miniscule 75bp yield, the franc is second only to the yen in offering the lowest interest rate amongst the majors.  Though, that dynamic might change in the near future as officials from the SNB have hinted that Swiss rates may rise if the economy continues to grow. Should that occur, a major change in sentiment may finally benefit the currency. In the meantime  we believe that traders will find Swissie attractive against the euro as a stark contrast of both steady economic progress and political stability.   

Turning briefly to Japan, we note that today's Small Business Confidence Indicator registered an increase of 50.4 from 48.8 - the first time it rose above the 50 boom/bust level since July of 2004. The news augurs well for the Japanese economy as confidence is now spreading through the full spectrum of Japanese society. Nevertheless, the yen, much like the franc has been the victim of carry flows and until market sentiment begins to focus on dollar's problems the weakness in the unit is likely to continue

Boris Schlossberg is a Senior Currency Strategist at FXCM.