EURCHF dropped sharply to 1.11197 low, breaking below key technical support levels. Trades will have to go back to 2017 to find new levels. With political risk premia rising in Europe, participants are rotating into the closest safe-haven trade. This week’s SNB meeting will include verbal interventions including the threat of currency purchases and deeper negative rates. However, the threshold for SNB physical interventions remains high. Weak CPI release today indicates that expectation for a shift toward tighter monetary policy is mistaken. USDCHF will further benefit from the “risk-off” environment is now seeing wider CHF strength key support is located .9953. Especially, considering expectations that a dovish Fed could prompt speculation of two rate cuts in 2019. CHF status as the regional safe haven play will continue to benefit CHF against G10 (exception JPY). The catalyst in our view for the sever CHF move was Trump visit to Britain which has fortified “hard” Brexit worries. Trump strong support for Nigel Farage will only charge the Brexit base, which is coming off a strong EU election win.
By Peter Rosenstreich
