SNB PREVIEW: TWO SCENARIOS AND THEIR IMPLICATIONS FOR EUR/CHF – CREDIT SUISSE

Tomorrow’s SNB meeting could be a decisive event for EUR/CHF. Economists at Credit Suisse envisage two scenarios.

Hawkish (60% odds)

Hiking by 50 bps would cement the SNB’s inflation-fighting credentials amid the recent trend of lower headline and core inflation rates. This hawkish scenario could be even more powerful were the SNB to signal further interest rate hikes in the future and should be Franc supportive. 

Dovish (40% odds)

Hiking 50 bps but hinting at an end to the rate hiking cycle or ‘only’ raising rates by 25 bps combined with a dovish language should lead to a weaker Swiss Franc. The peak in the implied policy rate is near. Such a dovish scenario should lead to a softer CHF on a short- and medium-term basis.

The EUR/CHF target for end of this quarter is 0.96000

We stick with our current 0.9600 EUR/CHF target for the end of this quarter and would not rule out even lower levels in the medium term should our hawkish scenario unfold. Should the SNB decide not to live up to our hawkish expectations, we would not rule out a potential squeeze higher toward parity in EUR/CHF.