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17 Sep 2015
SNB does nothing to weaken the Swissie - UBS
FXStreet (Córdoba) - The EUR/CHF exchange rate fell slightly after the Swiss National Bank (SNB) released its quarterly monetary assessment. According to the UBS analyst team, for the time being there is nothing in the SNB communication that makes us believe EUR/CHF will leave its current 1.05-1.10 range.
Key Quotes
“This reaction, in our view, is in line with the fundamental track the SNB has taken: though inflation for this year and next is forecast to drop lower than previously anticipated, the SNB has not unveiled any new policy ideas to stabilize long-term inflation expectations. In fact, there was no hint of a policy change and no discussion of new tools that could be used should deflation/disinflation persist and the Swiss franc stay strong for a prolonged time. In short, the SNB did not present any policy action that would weaken the Swiss franc at this moment”.
“The policy action presented on Thursday is based on the principle of hope. Hope that the US Federal Reserve will raise rates Thursday and reinforce the market speculation that it will follow through with a series of rate hikes. Hope that the oil price will stabilize or even rise, which would push overall inflation rates higher. Hope that the Eurozone economy will continue to recover and that European inflation will rise in reaction to the European Central Bank's current quantitative easing (QE) program”.
“Should these hopes become reality, the deflationary pressure squeezing the Swiss economy would ease and in turn weaken the appreciation pressure on the Swiss franc. We have the same expectations, but we expect more from the SNB in terms of alternate plans in case things turn out worse than expected and such hopes evaporate”.
“For the time being there is nothing in the SNB communication that makes us believe EURCHF will leave its current 1.05-1.10 range. Next year we forecast it to rise into 1.08-1.13 territory when European inflation, hopefully, increases and markets start to discuss the end of QE”.
Key Quotes
“This reaction, in our view, is in line with the fundamental track the SNB has taken: though inflation for this year and next is forecast to drop lower than previously anticipated, the SNB has not unveiled any new policy ideas to stabilize long-term inflation expectations. In fact, there was no hint of a policy change and no discussion of new tools that could be used should deflation/disinflation persist and the Swiss franc stay strong for a prolonged time. In short, the SNB did not present any policy action that would weaken the Swiss franc at this moment”.
“The policy action presented on Thursday is based on the principle of hope. Hope that the US Federal Reserve will raise rates Thursday and reinforce the market speculation that it will follow through with a series of rate hikes. Hope that the oil price will stabilize or even rise, which would push overall inflation rates higher. Hope that the Eurozone economy will continue to recover and that European inflation will rise in reaction to the European Central Bank's current quantitative easing (QE) program”.
“Should these hopes become reality, the deflationary pressure squeezing the Swiss economy would ease and in turn weaken the appreciation pressure on the Swiss franc. We have the same expectations, but we expect more from the SNB in terms of alternate plans in case things turn out worse than expected and such hopes evaporate”.
“For the time being there is nothing in the SNB communication that makes us believe EURCHF will leave its current 1.05-1.10 range. Next year we forecast it to rise into 1.08-1.13 territory when European inflation, hopefully, increases and markets start to discuss the end of QE”.