After the ECB, it’s the SNB’s turn to disappoint

The SNB kept rates unchanged as expected by the consensus. This comes as a disappointment. First it would have been a great opportunity for the SNB to send a strong signal to the market that it has the firepower to withstand further easing from the ECB. Second the Swiss economy clearly kept on deteriorating over the last quarter, and a weaker franc would have provided much needed relief.

While our long call on USD/CHF ahead of the decision did not materialize, the downside risk was limited as we expected. Both the EUR/CHF and USDCHF were little changed yesterday.

Over the longer-term we continue to believe the Franc will weaken. The negative rates will encourage banks, pension funds and asset managers to invest abroad. Moreover the SNB will be forced to cut rates, if the ECB decides to ease further next year.

The EURCHF could go towards the 1.07 support where it will surely find some buying interest. The pair should remain rangy within 1.07 and 1.10 for the time being. On the USDCHF the 0.9760-0.98 zone will act as a major support; the bull trend is intact as long as we remain above it. 

USFCHF daily

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