CHF talking points:
- The Swiss National Bank will leave all its key interest rates and likely its rhetoric unchanged today.
- However, there is a small risk that the Swiss Franc will rise if the SNB acknowledges that the currency is no longer as overvalued as it was.
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Modest declines possible for USDCHF, EURCHF
The Swiss National Bank will keep all its key interest rates unchanged today and will almost certainly keep its commentary unaltered too. However, there is a risk that it may acknowledge that the currency is no longer as strong as it has been, potentially leading to small losses in USDCHF and EURCHF.
Currently, the SNB sight deposit rate is -0.75%, while its three-month Libor target is -0.25% to -1.25%. Those rates will be left where they are and the chances are that the bank’s commentary will be left unaltered too. However, it is possible that the SNB could hint that it is no longer as concerned about Franc strength as it has been after the currency’s recent declines, shown below by the rise in the US Dollar against it.
USDCHF Price Chart, Daily Timeframe (November 28, 2017 to March 14, 2018)
As the chart above shows, USDCHF is close to important trendline support so any weakness in the pair is likely to be minor. Professional traders’ positioning is currently neutral and sentiment is also neutral. However, any resurgence of risk-aversion on concerns about the US government’s trade policies and the turnover of staff at the White House would likely send USDCHF lower.
Traders should be aware, though, that any CHF strength from here would be curbed by continuing fears of SNB intervention to prevent any surges in demand for the currency.
Arguably, more interesting from a trading perspective is EURCHF, which is further from trendline support and therefore has further to fall if Franc strength emerges after the SNB meeting.
EURCHF Price Chart, Daily Timeframe (November 18, 2017 to March 14, 2018)
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--- Written by Martin Essex, Analyst and Editor
Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex
