Talking Points
- The Swiss National Bank is maintaining its expansionary monetary policy, keeping the target range for three-month Libor unchanged at between -1.25% and -0.25%.
- Elsewhere, Norway’s Norges Bank has also left its benchmark interest rates unchanged.
- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for next week on the DailyFX Webinar Calendar.
The Swiss Franc eased gently against the Euro in Europe early Thursday after the Swiss National Bank left all its key monetary policy levers on hold and said it would continue its efforts to prevent the Swiss Franc from strengthening against the Euro in the foreign exchanges.
“The SNB will remain active in the foreign exchange market as necessary, while taking the overall currency situation into consideration,” the central bank said in a statement. “The SNB’s expansionary monetary policy is aimed at stabilizing price developments and supporting economic activity. 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, thereby easing pressure on the currency. The Swiss Franc is still significantly overvalued,” it continued.
Chart 1: EUR/CHF 5-Minute Timeframe (December 15, 2016 Intraday)
Looking ahead, developments in EUR/CHF look likely to be influenced principally by Euro-Zone monetary policy rather than by anything that happens in Switzerland, particularly as the SNB has had little success in weakening the Franc, which is widely seen as a haven at times of market turbulence.
Nonetheless, the SNB made clear that it will continue to step in when it needs to. “Our monetary policy remains expansionary and continues to be based on two elements: the negative interest rate and our willingness to intervene in the foreign exchange market,” said Thomas Jordan, the SNB chairman.
Also on Thursday, the Executive Board of Norges Bank, the central bank of Norway, decided to leave its key policy rate unchanged at 0.50%. “Our current assessment of the outlook suggests that the key policy rate will most likely remain at today’s level in the period ahead,” commented Governor Oystein Olsen. Norges Bank analysis “suggests that the key policy rate will remain close to 0.5% in the coming years. At the same time, the key policy rate forecast implies a slightly higher probability of a decrease than an increase in the key policy rate in the year ahead.”
Despite this last comment, the Norwegian krone rose on the statement, hitting the EUR/NOK cross rate.
Chart 2: EUR/NOK 5-Minute Timeframe (December 15, 2016 Intraday)
--- Written by Martin Essex, Analyst and Editor
To contact Martin, email him at martin.essex@ig.com
