SNB Maintains 1.2000 EURCHF Floor, "will not tolerate" stronger Franc
THE TAKEAWAY: SNB leaves 1.2000 EURCHF floor unchanged -> SNB 3-month libor rate unchanged at 0.00% -> SNB sees high risks to Swiss economy -> EURCHF increases volatility after SNB release
The Swiss National Bank retained its 1.2000 correlation between the Swiss Franc and Euro which has been in place since last summer, defying speculation of a raise in the floor. The SNB’s 3-month labor rate (which functions as a benchmark interest rate) was also left unchanged at 0.00%. The EURCHF market saw increased volatility after today’s release, climbing past 1.2020 before dropping into 1.2008.
The central bank said risks to the Swiss economy remain “exceptionally high” in today’s market environment, and mentioned that uncertainty about the Euro crisis continues to rise amid a turbulent political season. The SNB also mentioned that the Euro crisis has contributed to artificial gains in the safe Franc, and said that it “would not tolerate” additional gains in the Franc. The SNB said it is prepared to take further measures “at any time” to enforce the EURCHF cap.
The Franc was volatile after today’s release, falling against the Euro before retracing the move. USDCHF dropped 15 points after the release.
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