The Swiss National Bank (SNB) surprised the market with an unexpected 50 basis points (bps) rate hike. Subsequently, economists at Rabobank have lowered their one-month forecast for EUR/CHF to 1.02 from 1.03.
SNB would likely desire to move away from negative rates completely
“The news of a 50 bps move came as a big surprise to the vast majority of participants. That shock was evident in the knee-jerk plunge in EUR/CHF this morning – a move only softened by the warning from SNB President Jordan that FX intervention was still a policy option for the central bank.”
“Looking ahead, the SNB would likely desire to move away from negative rates completely (from the current level of -0.25 bps). Not only would this likely have to be preceded by an upward revision on inflation forecasts, but signs that EUR/CHF would not fall dramatically would also likely be a condition.”
“Any sniff of crisis in the Eurozone would likely send EUR/CHF sharply lower on safe-haven flows which could close the SNB’s window of opportunity for any further rate moves.”
“We have lowered our one-month forecast for EUR/CHF to 1.02 from 1.03 on account of today’s move.”