There has been a great deal speculation that the SNB will raise the cap on the CHF to 1.25 level against the euro or perhaps even 1.30 this week.
That speculation has taken EUR/CHF as high as 1.2445 in recent sessions but the inability to trigger a barrier of at 1.2450 saw the EUR retrench a fair bit in the last two trading days as the EU summit proved a disappointment at the end of last week.
CHF shorts had built to significant levels in advance of the quarterly SNB policy meeting on Thursday. Given that there is no sign of a sustainable euro zone solution in the near-term, it would be folly, in my opinion, for the SNB to ramp up the peg. They would be better served to adopt negative interest rates without changing the peg rather than putting an artificial target for the market to shoot for via a 1.25 or 1.30 peg.
The market is already on board, expecting a move of some sort to weaken the franc. Heaven help the SNB if they fail to deliver.
