SNBs Jordan: Negative rates are ‘necessary for now’


  • SNB jawboning at a time of uncertainty in global markets. 
  • EUR/CHF at 1.08 is a key level to watch with respect to the ECB this month.

The Swiss Nation Bank's Jordan is crossing the wires, saying that negative rates are ‘necessary for now’ and that it cannot be said how long negative rates will last.

This is classic jawboning at a time of uncertainty in global markets. The CHF has recently hit more than two-year highs against the euro as escalations in the Chinese-American trade wars and various geopolitical tensions spook financial markets concerned for global growth. EUR/CHF is higher by 0.65% today, recovering from the aforementioned lows but remains in a persistent downtrend and troublesomly so for the SNB. 

"Swiss growth has been slowing down and we believe the economy will continue to decelerate in the coming months, suggesting another rate cut could be on the menu again," analysts at ING Bank argued.

"Swiss GDP increased by only 0.3% quarter on quarter in 2Q19, down from 0.4% in the first quarter, which was revised down further from 0.6%. On an annual basis and adjusted for the effects of sporting events, growth was 0.9%, down from previous quarters.

Domestic demand and foreign demand for services were weak in the second quarter. Trade tensions and the downturn in Germany, Switzerland's main trading partner, are clearly weighing on the outlook. Investment in capital goods fell by 1% qoq - a sign of dark clouds in the Swiss economic climate."

FX implications

CHF will continue to attract safe-haven flows, but there is always the risk that the SNB will intervene, especially if the European Central Bank dos what it is expected to do when it meets this month and cut interest rates. The SNB will not want EUR/CHF falling below 1.0800 considering half of its export trade is within the euro area.

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Feed news

Latest Forex News

Editors’ Picks

EUR/USD tension remains elevated ahead of the Fed

EUR/USD is trading above 1.1050, in a narrow range ahead of the all-important Fed decision. Chair Powell is set to cut rates but signal no further stimulus is on the cards.

EUR/USD News

GBP/USD extends its falls to 1.2450 amid weak UK inflation, Brexit impasse

GBP/USD has dropped to around 1.2450 as UK headline CPI missed with 1.7% in August. Brexit negotiations remain stuck according to Chief EU negotiator Barnier. The Fed decision is eyed.

GBP/USD News

USD/JPY holds on to recovery gains above 108.00 ahead of Fed

Not only upbeat trade numbers from Japan but upbeat trade/political headlines also help the USD/JPY pair to remain firm around 108.20 prior to Wednesday’s European session. Focus on FOMC decision.

USD/JPY News

Gold: Pivots around $1500 mark, awaits FOMC policy update

Gold extended its sideways consolidative price action through the early European session on Wednesday and was seen pivoting around the key $1500 psychological mark, awaiting FOMC policy decision.

Gold News

Forex Today: Fed set to trigger high volatility, oil falls, altcoins advance

Tension is mounting ahead of the Federal Reserve decision later today. Economists expect a 25 basis point rate cut amid slowing global growth and investment. 

Read more

Forex MAJORS

Cryptocurrencies

Signatures