USD/CHF Little Changed as SNB Opts For Status Quo, Brexit in Focus
- 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%
- "Brexit" may cause uncertainty and turbulence to increase in the global economy
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The Swiss Franc was little changed versus other majors (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 bank will remain active in the foreign exchange market as necessary. The bank emphasized explicitly that the negative interest rate and the SNB’s willingness to intervene in the foreign exchange market are intended to make Swiss franc investments less attractive. The bank commented again that the Swiss franc is still significantly overvalued. The SNB also said that the imminent UK referendum may cause uncertainty and turbulence to increase in the global economy.
In their latest policy meeting, the ECB signaled that they are in “implementation mode” of the Stimulus measures announced in March. The fact that the ECB are seemingly holding back on further stimulus for the moment might have reduced pressure on the SNB to further cut rates, as Franc strength versus the Euro could potentially burden on the Swiss economy due to the trading relations between Switzerland and the Euro-Zone.
With that said, there might potentially be another issue at play here. As was mentioned yesterday by Fed Chair Yellen, “Brexit” was a consideration for the Fed in their decision to keep rates unchanged. It seems likely to assume that the same goes for the SNB, as a “Brexit” scenario could potentially see higher demand for the Swiss Franc on a “safe haven” type of scenario.
Taking both these factors into consideration, it was expected that the SNB will opt to keep policy at status quo for the moment, until/if events dictate otherwise. With the decision widely expected, the Swiss Franc was little changed versus other majors.
Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 65.9% of traders are long the USD/CHF at the time of writing. The SSI is a contrarian indicator, implying further weakness ahead for the pair.
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USD/CHF 5-Minute Chart: June15, 2016
--- Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
To contact Oded Shimoni, e-mail oshimoni@DailyFX.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.