Believe it or not, there’s been some volatility in the Swiss franc for the last two months, especially above the franc ceiling of 1.2000. The recent breakout has some focusing on tomorrow’s Swiss National Bank meeting. And, although there isn’t much to expect from the interest rate decision, there is the potential for hints on future monetary policy going forward that will effect the EURCHF cross.

What to Expect

Swiss National Bank President Thomas Jordan, and fellow central bankers, are likely to keep rates at the current low of near zero for the time being. That’s no surprise. With the European Union likely to cut rates in the coming year, and Swiss inflation benign, central bankers have more reasons to keep rates lower than to raise them.

Additionally, policymakers are likely to note that the central bank remains committed to “unlimited” amounts of monetary easing when it comes to protecting the 1.2000 franc ceiling against the Euro that was implemented late last year. A persistently highly valued Swiss franc has remained the main culprit in allowing the central bank’s balance sheet to swell to over 5 times the size it was 5 years ago. Specifically, the measure has added approximately $454 billion in the last 13 months.

What Not to Expect

Given the economic outlook for the Swiss economy, it remains unlikely that SNB President Jordan will allude to an increase in growth forecasts for the Swiss economy. Unemployment has been creeping up in the world’s 19th largest economy, likely spurred by a slowdown in global demand. The country’s unemployment rate has actually increased from a low of 2.7% to 3.1% in November. Swiss leading indictors are additionally indicative of an economic slump, with the KOF survey dropping for the second consecutive time.

As a result, the current economic environment is likely to warrant further suppression of an appreciating Swiss franc, unless otherwise noted by the SNB – which isn’t likely in the short term.

Outlook

This is a good thing for EURCHF bulls as Swiss franc weakness is still likely to persist ahead of the 1.2000 figure on protection from the SNB. The notion is being supported by the technical fact that the EURCHF violated the 1.2022 range resistance barrier that had remained intact for the better half of the year. Further upside extension is likely in the pair, on a break of the 1.2183 September swing high – placing sights on a potential test of 1.2243.
EURCHFSource:  FXTrek Intellicharts