EURCHF - Where are the sore spots of the SNB?
The SNB delievered a real game changer in the last week and hiked its rate by 0,50%. The whole market got catched on the wrong foot and the EURCHF dropped immediatly by more than 200 Pips.
So whats next for the franc?
The SNB explained that they could intervene now from both sides.
So they could either slow a appreciating CHF (as they did many times) or they could also slow a depreciating CHF by selling their huge FX reserves (that was new and unexpected by the market)
My guess is that their 1st level on the downside would be the 1.0000 level (-> round number and psychological level)
Their level on the upside could be 1.05 as the EURCHF dropped strongly 2 times in the last weeks from this level without any news or data to support this rapid weakening.
Maybe it was the SNB already with their feet on the brakes? Again I'm just guessing here and I will have a close look on the SNB data in the next weeks to verify this thesis.
So a range in the EURCHF between 1.00 and 1.05 could be plausible.
What could be the points to break this range?
1. Inflation in Switzerland would need to drop significantly to give the SNB more room to breathe (upside pressure for the EURCHF)
2. ECB would need to become more dovish (downside pressure for the EURCHF)
3. sudden positive news from the Ukraine conflict (huge upside for EURCHF possible)
(4. Of course a further slowing in the world or european economy would also lead to downside pressure for the EURCHF)
So whats next for the franc?
The SNB explained that they could intervene now from both sides.
So they could either slow a appreciating CHF (as they did many times) or they could also slow a depreciating CHF by selling their huge FX reserves (that was new and unexpected by the market)
My guess is that their 1st level on the downside would be the 1.0000 level (-> round number and psychological level)
Their level on the upside could be 1.05 as the EURCHF dropped strongly 2 times in the last weeks from this level without any news or data to support this rapid weakening.
Maybe it was the SNB already with their feet on the brakes? Again I'm just guessing here and I will have a close look on the SNB data in the next weeks to verify this thesis.
So a range in the EURCHF between 1.00 and 1.05 could be plausible.
What could be the points to break this range?
1. Inflation in Switzerland would need to drop significantly to give the SNB more room to breathe (upside pressure for the EURCHF)
2. ECB would need to become more dovish (downside pressure for the EURCHF)
3. sudden positive news from the Ukraine conflict (huge upside for EURCHF possible)
(4. Of course a further slowing in the world or european economy would also lead to downside pressure for the EURCHF)
The ECB became more dovish and also the world economy together with the european economy slowed significantly leading to a depreciation of the EURCHF.
BUT: There are some early signs that the SNB starts to intervene slightly.