fundamental alert

SNB Cuts 3-Month Libor Range by 50 bp to 1.50-2.50%

Thursday, 06 November 2008 11:14:44 GMT  |  DailyFX Research

The SNB has cut its Libor target range by 50 bp to 1.50-2.50%. There was no policy decision scheduled today, but there had been speculation of a move as both BoE and ECB were expected to cut rates today. The SNB last cut in a coordinated move with other central bank. Unlike other central banks the SNB's main rate is not its lending rate, but the 3 months market rate and in the last step the bank lowered the target range for the Libor only by 25 bp, while promising to bring the actual rate down by 50 bp. This time it has lowered the target range by a full 50 bp. The bank said in a statement that the global economic outlook has deteriorated more severely than anticipated, which will have an impact on the Swiss economy. The slowdown, together with falling oil prices and the appreciation of the CHF mean lower inflation, according to the SNB, so that today's move "provides an impetus to economic activity, and will not jeopardize the return to price stability".

Meanwhile, Swiss Franc edged higher after knee jerk losses in the wake of the SNB's decision to cut it Libor rate by 50 bps to 1.50%-2.50%. The SNB said that the global economic outlook had deteriorated, noting the impact on the Swiss economy. EUR-CHF traded up to 1.5065 and down to 1.5000 immediately after the decision, but demand is currently supporting the cross around the 1.5020 area. EUR-CHF continued to find support underneath 1.5000 in the last two sessions amid ongoing speculation of a SNB move. Further CHF losses are are likely to be dependent on euro and sterling performance. Sterling has regained its composure after the BoE decision, while the euro is on heavier footing ahead of the ECB announcement.

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