EUR/CHF to extend its downfall towards the 1.0250 level – Credit Suisse

The Swiss National Bank (SNB) will announce its policy rate decision on Thursday, December 16 at 8:30 GMT, followed by a press conference at 9:00 GMT. Economists at Credit Suisse do not expect the SNB to deliver any significant policy changes. Combined with a still dovish outlook for the European Central Bank (ECB), they stick to their EUR/CHF 1.0250 target.

No big policy changes expected from the SNB

“In our base-case scenario, in which the SNB leaves its policy rate and FX language unchanged, we do not believe that such an outcome will be a significant game-changer to the downward trend in EUR/CHF.” 

“The main driver of the downtrend is still the ECB’s loose monetary policy. We do not see this stance changing anytime soon. We do not see the medium-term downward pressure on EUR/CHF abating.”

 “In a dovish scenario, the SNB considers the Swiss franc as ‘overvalued’ instead of ‘highly valued’, sounds overly cautious on the growth outlook, highlights downside risks to the inflation forecast and lowers its exemption threshold. In this case, we can envisage a knee-jerk reaction higher in EUR/CHF but would be inclined to fade such a move, as we don't believe that the SNB will intervene aggressively on a sustained basis.”

“In a hawkish scenario, there is also the possibility, albeit relatively small, that the SNB raises its long-term inflation forecast materially, in which case the Swiss franc will most likely appreciate even more.”

“In sum, we stick to our 1.0250 target for now and would consider our view incorrect at levels above 1.0720.”