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Aila Mihr, analyst at Danske Bank, notes that the Swiss National Bank (SNB) kept all policy measures and signals unchanged yesterday as expected.

Key Quotes

“The stance and another downward revision to inflation forecasts reflect a central bank that sees little relief in getting back to target. With the ECB sidelined, the SNB will have to remain patient for longer with little ability to shift into genuine ‘normalisation’ mode.”

“EUR/CHF saw a delayed drop after the announcement and is a good example of the perceived asymmetry in reaction functions that haunt FX markets: SNB is constrained toolwise, while the Fed has room to cut.”

“What about the ECB? Near term, we think FX markets will test its willingness to shift into easing mode again. This hints at a higher EUR easing risk premium on a 3M horizon, which leaves downside risks to EUR/USD intact in our view.”