Swiss Franc Soars as SNB Ignores Threat of ECB Stimulus Expansion

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Talking Points:

• Swiss Franc Soars After SNB Interest Rate Decision

• Officials Visibly Ignore Threat of More Dovish ECB

• Libor, Sight Deposit Rates Unchanged as Expected

The Swiss Franc traded broadly higher after the Swiss National Bank delivered its monetary policy announcement. Officials left the policy mix unchanged as broadly expected by economists, maintaining the -1.25 to -0.25 percent range for the 3-month Libor as well as the -0.75 percent setting for the sight deposit rate.

The text of the policy statement accompanying the rate decision seemed significant primarily in what was conspicuously omitted rather than what was actually said. Specifically, the SNB made no mention of the latest dovish turn in ECB rhetoric and the possibility for stimulus expansion it implied.

The Swiss central bank now-infamously abandoned its EURCHF floor at 1.20 after Mario Draghi and company launched their QE effort. A further expansion of ECB stimulus would introduce upward pressure on the Franc relative to the single currency, undermining the SNB’s fight against deflation.

With that in mind, the markets likely expected the SNB to at least acknowledge the prospect of greater ECB accommodation if not to offer rhetoric explicitly expressing a willingness to do more as well. The apparent absence of any such language looks to have been interpreted as comparatively hawkish versus, sending the Franc upward.

DailyFX Currency Analyst James Stanley identified USD/CHF support at 0.9681. Prices are currently testing below this barrier, with an eye to challenge the next downside threshold at 0.9498 if bearish momentum is sustained.

USDCHF 15-minute Chart

Swiss Franc Soars as SNB Ignores Threat of ECB Stimulus Expansion

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