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16 Jan 2015
SNB anticipating 'more pronounced' policy divergences ahead -
FXStreet (Bali) - By removing the EURCHF cap at 1.20, The SNB is anticipating “more pronounced” policy divergences ahead, notes Derek Halpenny, European Head of Global Markets Research Global Markets Division for EMEA at Bank of Tokyo-Mitsubishi UFJ.
Key Quotes
"The SNB appears to be anticipating what lies ahead for the financial markets this year. Next week of course we are likely to get the ECB sovereign debt QE program while most recent economic data points to a robust year of growth in the US – the SNB cited divergences in monetary policy as a trend that “is likely to become even more pronounced”."
"Given the pronounced divergence, the SNB effectively stated that it expects EUR/USD to fall further and hence USD/CHF to rise further, thus reducing the need for the EUR/CHF floor. Does the SNB know something in regard to the size of the ECB QE program coming? For now, we can only see the franc strengthening further over the near-term as the markets adjust to the change in policy. As of now, the EUR/CHF intra-day low is 0.8517 and a period below parity in EUR/CHF seems highly likely over the near-term."
Key Quotes
"The SNB appears to be anticipating what lies ahead for the financial markets this year. Next week of course we are likely to get the ECB sovereign debt QE program while most recent economic data points to a robust year of growth in the US – the SNB cited divergences in monetary policy as a trend that “is likely to become even more pronounced”."
"Given the pronounced divergence, the SNB effectively stated that it expects EUR/USD to fall further and hence USD/CHF to rise further, thus reducing the need for the EUR/CHF floor. Does the SNB know something in regard to the size of the ECB QE program coming? For now, we can only see the franc strengthening further over the near-term as the markets adjust to the change in policy. As of now, the EUR/CHF intra-day low is 0.8517 and a period below parity in EUR/CHF seems highly likely over the near-term."