In a night absent of any significant economic data the EUR/USD traded sideways giving up some of its gains from yesterday but maintaining the 1.1900 level through Asian and early European sessions. According to IFR markets a UK clearer upped its forecast of US interest rates to 5.5% and the news caused a flurry of selling in the pair as some traders adjusted  their interest rate expectations. But EUR/USD stabilized around the 1.1900 figure buoyed by a bullish IFO report from yesterday and the expectations by the market that the US Durable Goods report due 13:30 GMT today may show a much worse than projected result of -2.5% contraction.

In Switzerland, the KOF leading indicator index registered the highest reading in 5 Ã,½ years hitting 1.30 up from 1.22 the month prior and slightly higher than the 1.25 predicted by economists. Swiss economy appears to be running on all cylinders as both exports and consumer spending have shown healthy gains in the past few weeks.  The EUR/CHF cross initially traded down to 1.5585 as a result of the news, but quickly recovered to the 1.5600 level. The pair continues to trade off interest rate differentials  with the euro expected to open up a 150 basis point spread on the Swissie after the Mach 8th ECB meeting.  While the Swiss economy may be experiencing better growth than its gigantic neighbor next door, Swiss monetary policy does not appear to be nearly as hawkish as that of the Eurozone. With SNB monetary authorities still coy about their interest rate intentions in the next 6 months the market is giving the benefit of the doubt to the euso.

Finally in Japan tonight the typical tap dance between fiscal and monetary officials, as Governor Fukui's yen bullish comments that QEP is nearing an end were partially offset by statements from Finance Minister Tanigaki who noted that Japan remains in a state of deflation and expressed concern over the latest volatility in the USD/JPY.  As we noted yesterday this volatility will only exacerbate as the currency is pulled this way and that by the latest commentary from authorities.

Boris Schlossberg is a Senior Currency Strategist at FXCM.