USD/CHF eases from 0.7980 following the release of the SNB minutes
- The US Dollar eases from session highs at 07980 against the Swiss Franc but maintains its bullish trend intact.
- The SNB minutes downplay deflationary pressures and rule out negative interest rates.
- Swiss economy remains resilient, despite US trade tariffs, according to the minutes.
The US Dollar remains firm against the Swiss Franc. Still, the pair eased moderately to session highs, at 0.7980, as the Swiss National Bank downplayed deflationary pressures in the minutes of their last monetary policy meeting.
The SNB kept its benchmark interest rate unchanged at 0% and ruled out speculations about pressures to ease its monetary policy further, as, according to the minutes, the inflationary pressures in the economy are not expected to be persistently negative.
The bank, however, highlights the increase in US tariffs as well as the developments of global demand as the main challenges for the Swiss economy, although the economic outlook is not giving reasons for concern at the moment, with most economic indicators pointing to moderate growth.
The release of the minutes has provided a mild impulse to the Swiss Franc. The US Dollar had been crawling higher until then, supported by a moderate risk aversion amid new trade frictions between the US and China, following US President Trump’s announcement of new restrictions on software exports to the Asian country.
SNB FAQs
The Swiss National Bank (SNB) is the country’s central bank. As an independent central bank, its mandate is to ensure price stability in the medium and long term. To ensure price stability, the SNB aims to maintain appropriate monetary conditions, which are determined by the interest rate level and exchange rates. For the SNB, price stability means a rise in the Swiss Consumer Price Index (CPI) of less than 2% per year.
The Swiss National Bank (SNB) Governing Board decides the appropriate level of its policy rate according to its price stability objective. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame excessive price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Yes. The Swiss National Bank (SNB) has regularly intervened in the foreign exchange market in order to avoid the Swiss Franc (CHF) appreciating too much against other currencies. A strong CHF hurts the competitiveness of the country’s powerful export sector. Between 2011 and 2015, the SNB implemented a peg to the Euro to limit the CHF advance against it. The bank intervenes in the market using its hefty foreign exchange reserves, usually by buying foreign currencies such as the US Dollar or the Euro. During episodes of high inflation, particularly due to energy, the SNB refrains from intervening markets as a strong CHF makes energy imports cheaper, cushioning the price shock for Swiss households and businesses.
The SNB meets once a quarter – in March, June, September and December – to conduct its monetary policy assessment. Each of these assessments results in a monetary policy decision and the publication of a medium-term inflation forecast.
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
