EUR/CHF fell around 50 pips in the immediate aftermath of the SNB decision, from 1.2110 to 1.2060, before bouncing back to around 1.2080.
The SNB left the LIBOR target rate unchanged as everybody had expected. However, no negative deposit rate was announced. The SNB will have to be more alert if the euro continues to slide against the US dollar.
The central bank says that the economic outlook has deteriorated considerably and that the risk of deflation has increased once again. Also when looking outside of Switzerland, the SNB is worried: the global recovery is weaker than seen earlier and geopolitical tensions could weigh on confidence.
These worried comments imply more action, but we haven’t seen them now. So, the Swiss franc is stronger.
The Swiss National Bank was expected to leave the 3 year old floor of 1.20 under EUR/CHF unchanged once again. However, some had speculated that Thomas Jordan and his colleagues would take a page from the ECB’s book and set a negative deposit rate, thus preempting a further fall of the euro that would put pressure on this floor.
Those who had expected a negative deposit rate were probably disappointed and this is what we are seeing now.
EUR/CHF traded around 1.21 just before the announcement.
This is how it looks on the chart:
The Swiss have the lightest cycle: they make a decision just once per quarter. The interest rate has been at rock bottom levels since the early days of the financial crisis. No change is expected to the LIBOR rate, standing at a maximum of 0.25%.
More: USD/CHF closing on a rejection candle formation
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