The Swiss Franc has understandably weakened after the surprise hold in the policy rate. Economists at ING analyze CHF outlook.
Temporary setback for the Swiss Franc
The SNB surprised today by deciding to keep its key rate at 1.75%, whereas the consensus was for it to rise by 25 bps to 2%. However, the SNB has said that it will still be using the exchange rate to "provide appropriate monetary conditions" and to do this will likely continue to sell FX.
Looking ahead, the strong Dollar environment – keeping USD/CHF bid – means that the SNB will have to manage EUR/CHF lower to get the nominal CHF appreciation it needs. That is why we suspect that any near-term spike in EUR/CHF is not sustained and that as long as the SNB is leaning hawkish, levels near 0.9500 and possibly a little below are likely later this year.
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