SNB monetary policy announcement due Thursday - what to expect for CHF(preview)

Author: Eamonn Sheridan | Category: Central Banks

I posted a couple of quickie previews earlier this week for the Swiss National Bank and the Swiss franc here:

If you read that one you'll have a spoiler to this post - no change to policy is pretty much the unanimous expectation.

This preview via Barclays raises questions on the CHF though (bolding mine):

expect no change to SNB policy or rhetoric
  • rate unchanged at -0.75%
  • target range for 3m Libor at -1.25/-0.25%
  • we envision no changes to the exemption from negative deposit rates
  • we expect the SNB to re-iterate its commitment to intervene in FX markets to curb unwanted appreciation
  • while changing the language of the December statement to suggest that the franc's depreciation has recently stalled, following c.2.5% CHF effective exchange rate appreciation since December. 
See limited impact on EURCHF as a result
  • We continue to project trend franc depreciation, as the SNB lags other central banks in normalizing policy.
Yet, a set of low-probability SNB actions introduce asymmetric downside risks to EURCHF and our forecasts
  • In particular, an acknowledgment by the SNB that the CHF is not so very overvalued anymore, following c.6% REER depreciation H2 2017, or any signs of SNB fatigue or discomfort with the current size of the balance sheet, could prove market moving, yet timing is hard to gauge.