Facing a strong depreciation against the single currency (EUR/CHF at 1.17; +9.04% in 1 year) and anticipating the risk of a potential trade war escalation, the Swiss National Bank finally took the decision to maintain its deposit rate stable at -0.75%. The last rate change occurred in January 15th 2015.
The SNB made it clear that the CHF is still overvalued and confirmed its concern about the forex market, which remains choppy, a situation that could completely change the story for the CHF in the event of volatility escalation. Considered as a safe haven asset, the CHF (incl. Gold) remains very sensitive to its macro environment, thus the reason of maintaining CHF-nominated investment attractiveness as low as possible.
As the Swiss economy continues its expansion (4Q 2017 GDP: 1.90%), inflation expectations are decreasing on the other side. SNB projections view the inflation rate at 0.60% (previously: 0.70%) for 2018, 0.90% in 2019 and 1.90% in 2020 with current interest rates unchanged.
Gaining strong momentum since the beginning of March 2018, EUR/CHF is trading sideways since March 7th 2018. The pair is currently contained between hourly support and resistance given at 1.1677 (07.03.2018 low) and 1.1735 (08/03/2018 high) and expected to remain so in the short-term.
By Vincent Mivelaz