19 Dec 2014
SNB imposes negative rates, ECB QE might weigh down EUR/CHF – Nomura
FXStreet (Barcelona) - The Research Team at Nomura explains that SNB imposing negative rates was aimed at maintaining the CHF 1.20 floor, but probable QE action by the ECB in January might weigh down EUR/CHF.
Key Quotes
“The Swiss National Bank (SNB) decided to impose a negative rate on the sight deposit account balance at the SNB, while cutting the three-month Libor target rate by 25bp to -0.25% with the specific aim of taking the three-month Libor into negative territory.”
“The target range was changed to -0.75% to 0.25%, back to its usual width of 1 percentage point (it had previously been only 25bp). This is something we had been expecting, but to cut rates before the outcome of the ECB meeting in January is somewhat a proactive move by the SNB.”
“We believe EUR/CHF will trade away from the 1.20 level for now, but the ECB’s potential QE action on 22 January could weigh on EUR/CHF. However, the timing of the effective date for the negative rate is the same day, 22 January, which may not be just a mere coincidence.”
“We expect the European G10 currencies to underperform against USD into next year, and we believe the best approach to express this view would be to sell CHF against the USD.”
Key Quotes
“The Swiss National Bank (SNB) decided to impose a negative rate on the sight deposit account balance at the SNB, while cutting the three-month Libor target rate by 25bp to -0.25% with the specific aim of taking the three-month Libor into negative territory.”
“The target range was changed to -0.75% to 0.25%, back to its usual width of 1 percentage point (it had previously been only 25bp). This is something we had been expecting, but to cut rates before the outcome of the ECB meeting in January is somewhat a proactive move by the SNB.”
“We believe EUR/CHF will trade away from the 1.20 level for now, but the ECB’s potential QE action on 22 January could weigh on EUR/CHF. However, the timing of the effective date for the negative rate is the same day, 22 January, which may not be just a mere coincidence.”
“We expect the European G10 currencies to underperform against USD into next year, and we believe the best approach to express this view would be to sell CHF against the USD.”