Which is why a move, if it comes to raise the floor beneath EUR/CHF, will be much less impactful than the move to put in the 1.20 floor back in early September.
The market is now good and short the Swiss franc in anticipation of a move from the SNB. The prospect of negative short-term interest rates was floated last week while today’s negative CPI figures certainly cements the case for further action from a fundamental basis.The BIS was a rumored buyer just below 1.2400 this morning, we heard from market sources, setting the stage for the pop as high as 1.2425/30 a short while ago.
The trouble for Switzerland is that there is no element of surprise this time around. They won’t get a 10% slide in the franc in a day like they did in September. You’ll have folks selling to EUR/CHF strength, especially if the raise the CHF cap only to 1.25, rather than 1.30 as the bulls EUR/CHF would like.
We’ve traded within 30 pip or so of the September highs; expect options-related buying if 1.2500 is overcome in the near-term. But expect more two-way traffic this time around than in September.
