The SNB’s expected December 10 rate cuts have already been priced in to the Swiss Franc.
The central bank’s failure to do more than the market expected resulted in a stronger CHF.
Growing uncertainty over the Fed’s 2016 monetary policy is a bullish factor for the franc.
As they watched the euro strengthen following the ECB’s meeting, SNB representatives rubbed their hands in glee. However, by the start of the Asian FOREX session, the franc was already recovering from its wounds. Now, Bern is back to square one, once again feverishly wondering what it can do. The European Central Bank was unable to satisfy investors, only cutting deposit rates from -0.2% to -0.3% and extending its quantitative easing program to March 2017, increasing the latter to €360 billion. The markets saw neither increased monthly purchases, nor cuts to the refinancing rate, nor the removal of the minimum yield on bonds purchased by the ECB. As a result, EUR/CHF prices soared to their highest since mid-October, but they did not stay at that level.
The synchronized EUR/USD and USD/CHF dynamics over the last month and a half suggest that it is not only the ECB’s expansionary fiscal policy that is priced into the euro, but also that franc prices have already taken an interest rate cut from -0.75% to -1.25% into account. Such an outcome to the December 10 meeting is predicted by Bloomberg experts.