CHF: Switzerland returns to UST's Monitoring List – ING

Switzerland and Ireland were added to the US Treasury's monitoring list when it comes to FX practices, ING's FX analyst Chris Turner notes.

Substantial break over 0.94 requires a large SNB rate cut

"This is unwelcome attention for the Swiss National Bank which faces inflation near zero, a very strong Swiss franc and heavily uses FX intervention as part of its monetary policy."

"While the SNB will publicly say that this new US Treasury designation changes nothing when it comes to FX intervention, it will certainly make life more difficult. And with FX intervention potentially constrained, at the margin it could favour a 50bp rate cut from the SNB on 19 June. For reference, the OIS market currently prices a 30bp rate cut."

"EUR/CHF has been enjoying a little support from the ECB's end-of-cycle rhetoric yesterday. But a substantial break over 0.94 will likely require that large SNB rate cut later this month."