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Swiss Franc Little Changed As SNB Keeps Policy at Status Quo

Swiss Franc Little Changed As SNB Keeps Policy at Status Quo

Oded Shimoni, Junior Currency Analyst

Talking Points:

  • The Swiss Franc was little changed versus its major currency counterparts
  • SNB keeps Deposit Rate unchanged at -0.75%, 3-Month Libor Target Range at -1.25% to -0.25%
  • The Central bank claims the Swiss franc is still significantly overvalued

See how retail traders are positioning in the majors in your charts using the FXCM SSI snapshot.

The Swiss Franc was little changed versus it’s major currency counterparts (at the time this report was written) after today’s SNB rate decision saw interest rates unchanged at record low negative -0.75% on sight deposits, as was expected by economists. The SNB also kept the 3-Month Libor Target Range unchanged at -1.25% to -0.25%, also as expected.

Looking into the press release, the SNB commented that the Swiss franc is still significantly overvalued, and that Negative interest is making Swiss franc investments less attractive. The Central Bank downgraded inflation forecasts to -0.8% versus the prior December forecast of -0.5% for 2016. For 2017, the bank sees inflation at 0.1%, 0.2% lower than in the previous quarter, while for 2018 inflation is seen at 0.9%.

In their latest policy meeting, the ECB provided an aggressive policy decision which saw the Euro rally during the Draghi press conference which signaled measures are now directed to credit and not the FX channel. It was speculated before the meeting that if the Euro plunges on the decision, it would force the SNB to react, presumably with a rate cut further down into negative territory and/or FX intervention, as Franc strength could potentially burden on the Swiss economy due to the trading relations between Switzerland and the Euro-Zone. As was recently mentioned by DailyFX Chief Currency Strategist John Kicklighter, the SNB monetary policy actions are such that they try to do more than the ECB to keep the exchange rate in check. After the Draghi press conference gave the Euro a boost last week, it appears that some pressure had been taken off the SNB to act, and the expected SNB decision had little impact on the market.

EURCHF5-minute Chart

Swiss Franc Little Changed As SNB Keeps Policy at Status Quo

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