Economists at Credit Suisse do not expect any significant policy changes from the SNB meeting. As they do not believe that the SNB is currently active in the FX markets and given the dovish ECB’s monetary policy stance, the EUR/CHF pair is expected to decline further towards the 1.0800 level.
SNB will most likely affirm its current stance
“We do not expect any major changes to the current SNB’s stance at tomorrow’s meeting. Most likely, the SNB will leave its main policy rate unchanged and will keep its FX language intact as well. We note, though, that the recent increase in sight deposits has almost come to a halt. This would suggest that the central bank has stopped intervening for the time being. However, we would not rule out renewed intervention should the franc appreciate significantly and in a speedy fashion.”
“We expect the ECB to change its definition of price stability to 2% headline inflation, with a symmetrical intolerance for sustained deviations higher or lower. Given that core inflation has been stuck stubbornly at 1% for the best part of a decade, the ECB’s ongoing challenge will be to deliver sustainably higher inflation. That will require continued asset purchases beyond the end of the pandemic.”
“We continue to believe that the divergent monetary policy stance between the Eurozone and Switzerland should weigh on EUR/CHF. Consequently, we believe that EUR/CHF will continue to grind lower towards our 1.0800 target.”
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