SNB strategy from Credit Agricole

Last week's disappointment by the ECB should have decreased pressure on the SNB to turn more aggressive on monetary policy. It must be remembered too that SNB Vice Chairman Zurbruegg just recently stressed that interest rates around the current levels are appropriate. Even if the still overvalued franc keeps monetary conditions tight to the detriment of price developments a large part of weak inflation should be due to external factors such as weak commodity price developments.

As the SNB has no influence on commodities and as EUR/CHF has been broadly stable of late, we see little scope of them announcing additional stimulus measures this week.

Elsewhere it must be noted that capped liquidity expectations, as driven by the ECB, may make a case of risk sentiment turning more unstable towards the end of the year.

This could increase safe haven demand for the franc against high yielder such as the AUD.

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