euro to swiss franc

The Swiss National Bank raised interest rates by 75 basis points to 0.5% as planned, bringing the rate into positive territory for the first time since 2015. A reverse tiering system and a reduction in liquidity were also announced. EUR/CHF suffered a short squeeze on the news, but should come lower again 75bp increase As expected, the SNB has just announced an increase of 75bp in its key interest rate, bringing it to 0.5%. The rate in Switzerland is therefore back in positive territory for the first time since January 2015 and is no longer the lowest in the world. It is the end of an era. This rate hike is intended to combat inflation in Switzerland, which reached 3.5% in August, and is therefore higher than the SNB's objective of having inflation between 0 and 2%. Thanks to a more favourable energy mix, a lower share of energy in consumption, and the strength of the Swiss franc, which limits imported inflation, inflation in Switzerland is neverthel

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ECB Offering The Euro Support (EUR/USD), Strengthening Of The Renminbi Supporting The EUR and GBP, SNB Turns Hawkish (EUR/CHF) - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 23.05.2022 10:29
Summary: ECB offering support to the EUR, whilst easing lockdowns in China aids in the weakening US Dollar. Euro and GBP are likely to strengthen with the Renminbi. SNB and ECB hawkishness offers support to their respective currencies. GBP/CAD Read next: US Dollar Is Likely To Experience Volatility In The Coming Weeks (EUR/USD), UK Retail Data Exceeds Market Expectations (EUR/GBP), SNB Turns Hawkish Causing the CHF To Rally (EUR/CHF) - Good Morning Forex!  Easing lockdowns in China dragging down the US Dollar Market sentiment for this currency pair is reflecting bullish signals. On Monday the European Central Bank (ECB) announced that it is likely that July would be the starting period for raising interest rates. At the same time, the easing of lockdowns in China has aided in weakening the US Dollar. The trading week is full of US events along with some European Central Bank events, all of which will be watched closely. EUR/USD Price Chart Euro and GBP both showing signs of strengthening Market sentiment for this currency pair is reflecting mixed signals. The prospect of the Chinese Renminbi rebounding is likely to have a positive impact on the value of both the Pound Sterling and the Euro. In addition the market believes that the Bank of England (BoE) is likely to continue raising interest rates in the coming months along with the increased likelihood of the European Central Bank (ECB) raising the interest rates. EUR/GBP Price Chart SNB and ECB hawkishness caused mixed sentiment for this currency pair. On Thursday last week the president of the Swiss National Bank (SNB) said that they were ready to act on the rising inflation, the hawkishness of the SNB caused the Swiss Franc to rally. The potential hawkishness of the European Central Bank (ECB) is also causing the Euro to strengthen, leaving the market sentiment for this currency pair showing mixed signals. EUR/CHF Price Chart GBP rallies against the CAD The strengthening of the GBP against the CAD throughout last week has come in the wake of increasing UK government bond yields. The strengthening came in the wake of the release of UK employment data, inflation and retail data all which support further increases in the UK government bond yields. GBP/CAD Price Chart Read next: (FTSE) FTSE 100 Rallies In Response To Positive Economic Data, US Dollar Expected To See More Volatility  Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com
Serious liquidity crisis? According to Franklin Templeton, a massive, but unlikely deposit flight from Credit Suisse would have to happen

ECB Interest Rate Announcement Due Tomorrow Offers Euro Support (EUR/USD, EUR/GBP), JPY Facing Negative Outlook (USD/JPY), Potential For A Hawkish SNB Offers CHF Support (USD/CHF)

Rebecca Duthie Rebecca Duthie 08.06.2022 16:22
Summary: Markets are becoming more optimistic around hopes of a more hawkish European Central Bank (ECB). Firmer oil prices adding to downward pressure on JPY. Strong market expectations of a more hawkish Swiss National Bank (SNB). Read next: DOW 30 Turbulent In The Wake Of Targets (TGT) Profit Warning, Japanese Yen Suffering From BoJ Monetary Easing  Euro holds steady The market is reflecting mixed signals for this currency pair. The markets are becoming more optimistic around hopes of a more hawkish European Central Bank (ECB) tomorrow after adding a couple more basis points to the yearly forecasts. There has been talk of a 50bps hike in July and rumors of a possible hike on Thursday, it is likely that the market could see a change in ECB tone which has allowed the Euro to remain resilient against the US Dollar. On Wednesday, the market opened with strong economic Q1 data for the eurozone. The euro did not react instantly to the release of this data, likely due to its delay. EUR/USD Price Chart Anticipation of ECBs announcement offers Euro support The market is reflecting mixed signals for this currency pair. The Euro has gained against the pound sterling ahead of the market awaiting the European Central Banks (ECB) interest rate announcement, which is due tomorrow. Earlier in the trading week the pound sterling rallied in response to the news of Boris Johnssons vote of no confidence. If the ECB announces an interest rate hike in July, the pound sterling currency could be under pressure against the Euro. EUR/GBP Price Chart Negative outlook for Japanese Yen is likely to continue The market is reflecting bullish signals for this currency pair. In addition to the Bank of Japan (BoJ) continuing its monetary easing, firmer oil prices have added to the downward pressure on the Japanese Yen and both of these factors will continue to add to the negative outlook for the safe-haven currency. USD/JPY Price Chart CHF holding its position in the market The market is reflecting bullish signals for this currency pair. The Swiss Franc has recovered against the US Dollar in comparison to the lows experienced in mid-May when the US Dollar was at its strongest, the recovery comes in the wake of market expectations of a more hawkish Swiss National Bank (SNB). the expectations come from indications from policy makers that the SNB will increase its interest rates for the first time since the 2008 financial crisis. USD/CHF Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com
Credit Suisse case: Western Assets expects Swiss authorities to act if sentiment doesn't improve

Data Showed A Slowing Eurozone Economy (EUR/USD, EUR/CHF), UK PMI Data Came In Stronger Than Expected (EUR/GBP), NZD Was The Top Performing Currency On Thursday (GBP/NZD)

Rebecca Duthie Rebecca Duthie 23.06.2022 15:44
Summary: Eurozone data showed a slowing European economy for June. Pound sterling offered support from strong UK PMI data. NZD was Thursday's top performing currency. Read next: Fears Of Recession Loom (EUR/USD), UK CPI Inflation Data 9.1% For May (EUR/GBP), Surprisingly Strong Canadian Inflation Data (USD/CAD), EUR/JPY  Euro weakened in the wake of slowing economy data The market is reflecting mixed signals for this currency pair. The Euro fell sharply on Thursday in the wake of data that showed that the Eurozone economy had slowed during June and undermined the expectations for a series of rapid interest rate hikes from the European Central Bank (ECB) that are due to start in July. The fall in the Euro helped reinforce a bid for the US Dollar against all major pairs as investors continue to bet on a global economic slowdown. ` EUR/USD Price Chart UK PMI data beat market expectations The market is reflecting mixed market sentiment for this currency pair. The UK economy continued to grow during June as UK PMI data came in stronger than the market expected. At the same time UK wage pressures remained strong at firms that were increasingly willing to pass on price increases to customers, which is likely to continue to place pressure on the Bank of England (BoE) to raise interest rates. EUR/GBP Price Chart GBP/NZD upside risk The New Zealand Dollar was one of the top performing major currencies on Thursday when the NZD/USD pair seemed to be drawing dip-buyers from the market. The Pound to NZD has been contained over the past month, but with the NZD/USD pair testing major support levels, it is possible that the breakout risk for the GBP/NZD is on the upside. GBP/NZD Price Chart EUR/CHF The market is reflecting bearish signals for this currency pair. As the Swiss Franc continues to strengthen in the wake of the Swiss National Banks (SNB) interest rate hike, the Euro is weakening due to unfavourable economic data. EUR/CHF Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
EUR/CHF To Go Down? Swiss National Bank Decides On Interest Rate On Thursday!

EUR/CHF To Go Down? Swiss National Bank Decides On Interest Rate On Thursday!

ING Economics ING Economics 21.09.2022 15:23
The Swiss National Bank holds its quarterly monetary policy meeting on Thursday and is expected to hike its policy rate by around 75bp to 0.50%. The SNB has also been using FX policy to fight inflation. We think the SNB will continue to guide EUR/CHF lower at a rate of around 5-7% a year, in order to keep its real exchange rate stable A stable real exchange rate requires a lower EUR/CHF Since June, the SNB has been very clear: after years of fighting deflation, inflation is currently considered too high and the SNB wants to react by raising its interest rate. Inflation reached 3.5% in August, well below the inflation rate of neighbouring countries but above the SNB's target of between 0% and 2%. Since the SNB is no longer fighting an overvalued exchange rate, but rather believes that a strong Swiss franc is favourable, it can now raise interest rates quickly, without necessarily following the ECB's moves. This is why it moved ahead of the ECB by raising rates by 50 basis points in June. There is little doubt that the SNB will raise rates by at least 75 basis points at Thursday's meeting. A 100 basis point hike like the Riksbank did is not out of the question, especially since the SNB only meets once every quarter, unlike other central banks. However, with inflation "only" at 3.5% in Switzerland and the strength of the Swiss franc allowing imported inflation to fall, 100 points might be a bit too much of a move, so a 75 basis point hike remains more likely. Turning to FX matters, EUR/CHF has come steadily lower since June. Driving this trend have been some key statements from the SNB that (i) it wants to keep the real exchange rate stable and (ii) it will intervene on both sides of the FX market. In practice, we think that means the SNB wants to manage EUR/CHF lower. At the heart of the story is a more hawkish SNB and its view that as a small, open economy a weaker real exchange rate is inappropriate right now in that it would be providing additional stimulus at a time when CPI is overshooting its close to, but not over 2% target. What does a stable real exchange rate mean in practice? In the case of Switzerland, where inflation amongst its trading partners is running nearly 5% higher than in Switzerland, it means that a nominal 5% appreciation of the trade-weighted exchange rate is required to keep the real exchange rate stable. Rather conveniently, as we show in our chart below, the recent bout of Swiss franc strength leaves the trade-weighted Swiss franc around 5% stronger on a year-on-year basis. Not being a member of the G20 grouping allows Switzerland a little more latitude with its FX practices. And the above analysis suggests the SNB may be running a managed float here. With huge FX reserves of close to CHF900bn, the SNB remains a major force to be reckoned with and has the firepower to back up this managed float. Hence the remarks from the SNB in June that it planned to intervene on both sides of the market. Like the Czech National Bank (CNB), the SNB has previously experimented with FX floors, but the managed float underway today is more akin to activity undertaken by the Monetary Authority of Singapore (MAS) which more formally uses a managed float in its monetary toolkit. CHF: Real exchange rate stable YoY, nominal exchange rate +5% YoY Source: SNB, ING forecasts What does this mean for EUR/CHF? Away from the arcane concept of a real or nominal trade-weighted Swiss franc, what does this all mean to the more familiar EUR/CHF? First, it is important that the two biggest weights in the trade-weighted Swiss franc are: (i) the euro at 51% and (ii) the dollar at 23%. If the SNB wants a stronger trade-weighted Swiss franc then clearly EUR/CHF and USD/CHF are going to have to play their parts. Secondly, we have said that the SNB wants to keep the real CHF stable. In the chart above, we present our inflation forecasts, which show the inflation differential staying at around 5% into 2Q23 and only dropping back to zero by end 23. The argument then is that the SNB continues to manage the Swiss trade-weighted index firmer at this 5% year-on-year rate into next Spring before slowing the pace of appreciation. Thirdly, there are many moving parts in the trade-weighted exchange rate, but crucially our stronger dollar view means that USD/CHF may not come lower as the SNB wishes. This places a greater burden on the adjustment in EUR/CHF. Assuming USD/CHF stays flat, EUR/CHF would need to fall at around a 7% per annum rate to get the trade-weighted CHF stronger by 5%. Bringing it all together – and assuming that the SNB has the wherewithal to control EUR/CHF – we can argue that to achieve its objective of keep the real exchange rate stable according to our inflation forecasts, the SNB could be managing EUR/CHF on something like the following path… 4Q22 0.93, 1Q23 0.92, 2Q23 0.91 and flat-lining near 0.90 in 2H23. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX: The SNB Is Getting Its Stronger Swiss Franc Via Gains Against The Dollar

Swiss National Bank Decided On Interest Rate. Let's Check EUR/CHF Reaction To The Hike And Comments

ING Economics ING Economics 22.09.2022 14:39
The Swiss National Bank raised interest rates by 75 basis points to 0.5% as planned, bringing the rate into positive territory for the first time since 2015. A reverse tiering system and a reduction in liquidity were also announced. EUR/CHF suffered a short squeeze on the news, but should come lower again 75bp increase As expected, the SNB has just announced an increase of 75bp in its key interest rate, bringing it to 0.5%. The rate in Switzerland is therefore back in positive territory for the first time since January 2015 and is no longer the lowest in the world. It is the end of an era. This rate hike is intended to combat inflation in Switzerland, which reached 3.5% in August, and is therefore higher than the SNB's objective of having inflation between 0 and 2%. Thanks to a more favourable energy mix, a lower share of energy in consumption, and the strength of the Swiss franc, which limits imported inflation, inflation in Switzerland is nevertheless still much lower than in neighbouring countries. The SNB believes that the risk of second-round effects is significant. The SNB now expects inflation to reach 3.0% in 2022, 2.4% in 2023 and 1.7% in 2024. Against this background, it says it "does not rule out further rate hikes in the coming months". Reverse tiering and liquidity reductions Interestingly, the SNB also took two other important decisions. First, it will introduce a two-tier system for the remuneration of sight deposits held by banks and other financial market participants. From now on, they will be remunerated at the SNB's key interest rate (0.5%) up to a threshold, and the part above this threshold will be remunerated at a rate of 0%. The threshold is currently set at 28 times the reserve requirement. It is therefore a reverse tiering system. The aim of this system is, according to the SNB, to encourage money market operations, even in a situation of excess liquidity. At first sight, this may seem surprising, as it could push money market rates to remain below the SNB rate. However, this system goes hand in hand with the desire to reduce liquidity in the market, which in practice should severely limit the proportion of holdings bearing 0% interest. To reduce liquidity, the SNB will conduct open market operations (repo and T-bills). According to the SNB, the aim of this is to ensure that money rates reach the SNB's key interest rate as quickly as possible. Further rate hikes to come in December Given the inflation forecasts, there is little doubt that the SNB will continue to raise rates in the future. Unlike other central banks, the SNB only meets quarterly, so the next meeting will be in December. By then, the European Central Bank and the Federal Reserve will probably have raised rates by another 75 basis points in October and November and will raise rates again in December. The SNB could follow suit, probably raising its rate by 75bp in December as well. This is likely to be the last rate hike and we do not expect anything more in 2023. Indeed, the deteriorating economic outlook and the expected decline in inflation in 2023 should be enough to leave the SNB comfortable with a rate of 1.25% for the year as a whole. EUR/CHF: Short squeeze should not last EUR/CHF rallied around 1.5% following the 75bp hike and comments from SNB Chairman Thomas Jordan that it would intervene against excessive moves. The squeeze probably owed to some positioning for a 100bp rate hike today, following the Swedish Riksbank's 100bp hike earlier in the week. Like the Riksbank, the SNB now only has one further rate meeting this year. However, we do not think this EUR/CHF rally will last. We think the SNB is happy to guide EUR/CHF lower as a means to keep its real exchange rate stable - given trading partner inflation is some 5% higher than in Switzerland. At the start of the year, few would have believed the SNB would be comfortable with EUR/CHF at today's level of 0.95/0.96. Equally, we think the case is growing for EUR/CHF to be trading 0.93 by the end of the year and conceivably 0.90 by next summer. Developments to the East only add to the case to hold the Swiss franc now.  Read this article on THINK TagsSwitzerland Swiss National Bank SNB CHF Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

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