ING: SNB Gets Involved

ING write “EUR/CHF is moving higher. This is in contrast to a typical move one might see during periods of geopolitical stress.”

• “What is driving EUR/CHF now, however, and what drove it sharply lower late last year is rate differentials between the eurozone and Switzerland.”
• “Swiss National Bank President Thomas Jordan said that strength in the Swiss franc was having a material impact on the Swiss inflation outlook - i.e. depressing it.”
• “This can be seen with the sharp rise in the real trade-weighted Swiss franc.”
• “In effect, while the ECB might be pushing back against easing expectations, the SNB is pushing in favour of those easing expectations as the franc is too strong.”
• “We think EUR/CHF can trade back up to the CHF0.96 area over the next three months as ECB easing expectations are further reined in.”
• “We would also expect another dose of the same dovish commentary from SNB's Jordan when he speaks today in Davos.”