The franc has room to gain if US-China trade risks materialise
As expected, the SNB kept its policy rate unchanged and offered nothing new in its communication to markets in the final meeting of the year. This continues to allude to the fact that they remain "comfortable" with the franc at current levels - for the most part.
If you'd ask them, I'm sure they would prefer to see EUR/CHF start moving back above 1.11 and above the 200-day moving average - establishing more upside momentum.
However, as things stand, there is an asymmetric risk for the franc just before the year comes to a close. That risk lies in US-China trade negotiations.
If Trump decides to delay the 15 December tariffs, there is but limited upside for EUR/CHF and given that we're no closer to a trade deal just yet, the scope for any franc weakness should not be much in all honesty.
However, if Trump does go through with the 15 December tariffs, that raises the possibility of China retaliating and even calling off trade negotiations. Markets haven't quite braced themselves for that possibility and EUR/CHF could plunge below 1.08 as a result.
As such, the SNB may be sidelined for now but you can surely bet that they are crossing their fingers in hope that Trump doesn't pull the tariffs trigger ahead of the weekend.
