Expect no change to SNB policy or rhetoric - Barclays

In the view of the analysts at Barclays, the Swiss National Bank (SNB) is expected to make no changes to its monetary policy while reiterating its stance to intervene in the fx markets.

Key Quotes:

“We expect no change to SNB policy or rhetoric.

Rate unchanged at -0.75%.

Target range for 3m Libor at -1.25/-0.25%.

We envision no changes to the exemption from negative deposit rates.

We expect the SNB to re-iterate its commitment to intervene in FX markets to curb unwanted appreciation.

While changing the language of the December statement to suggest that the franc's depreciation has recently stalled, following c.2.5% CHF effective exchange rate appreciation since December. 

See the limited impact on EURCHF as a result.

We continue to project trend franc depreciation, as the SNB lags other central banks in normalizing policy.

Yet, a set of low-probability SNB actions introduce asymmetric downside risks to EURCHF and our forecasts.

In particular, an acknowledgment by the SNB that the CHF is not so very overvalued anymore, following c.6% REER depreciation H2 2017, or any signs of SNB fatigue or discomfort with the current size of the balance sheet, could prove market moving, yet the timing is hard to gauge.”