18 Dec 2014
EUR/CHF higher after SNB’s surprise – Scotiabank
FXStreet (Barcelona) - Camilla Sutton CFA, CMT, Chief FX Strategist at Scotiabank, notes that SNB’s surprise of negative interest rates pushed the EUR/CHF pair higher, anticipating the SNB to continue to defend the 1.20 floor for the pair.
Key Quotes
“EURCHF is higher after the SNB surprised markets by introducing negative interest rates. Responding to an increase in safe haven CHF flows, the SNB has introduced negative interest rates of –0.25% on sight deposits in excess of CHF10m, beginning January 22. The purpose is to push the three month Libor rate into negative territory and discourage CHF based investment and thereby support the EURCHF floor of 1.20 and avoiding a tightening in policy.”
“In his press conference, the SNB’s Jordan highlighted that: rising uncertainty on financial markets and the worsening of Russian crisis had driven safe haven flows into CHF, the SNB had responded with FX intervention in order to ensure the EURCHF floor of 1.20 and is prepared to act again. We expect the SNB to continue to defend the EURCHF 1.20 floor.”
Key Quotes
“EURCHF is higher after the SNB surprised markets by introducing negative interest rates. Responding to an increase in safe haven CHF flows, the SNB has introduced negative interest rates of –0.25% on sight deposits in excess of CHF10m, beginning January 22. The purpose is to push the three month Libor rate into negative territory and discourage CHF based investment and thereby support the EURCHF floor of 1.20 and avoiding a tightening in policy.”
“In his press conference, the SNB’s Jordan highlighted that: rising uncertainty on financial markets and the worsening of Russian crisis had driven safe haven flows into CHF, the SNB had responded with FX intervention in order to ensure the EURCHF floor of 1.20 and is prepared to act again. We expect the SNB to continue to defend the EURCHF 1.20 floor.”