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Swiss National Bank unlikely to change monetary policy in December - Commerzbank

The Swiss central bank is expected to take a breath and remain on hold during its meeting tomorrow. According to a Commerzbank research report, the Swiss National Bank is expected to feel relaxed. The EUR/CHF pair has established itself above the 1.16 mark so that interventions against the Swiss franc have become unnecessary now. Therefore, the Swiss National Bank is expected to reiterate tomorrow that it merely considers the franc to be “highly valued”. The central bank had first stopped referring to the Swiss franc as being “significantly overvalued” in September.

But it will not want to cave in completely, it is quite soon to do that and EUR/CHF would have to trade at much higher levels. Thus, the SNB would continue to highlight that it will be ready at all times to intervene in the FX market. The central bank is expected to upwardly revise its growth and inflation outlook tomorrow, however, this is unlikely to lead to a change in its monetary policy. As long as the European Central Bank continues to be expansionary the SNB would not want to risk making the franc more attractive again by normalising its monetary policy, stated Commerzbank.

The inflation trend will have to be better for that to happen as otherwise any external shock would reignite the risk of a return to negative prices.

“Despite the improved growth and inflation outlook the SNB will not change its monetary policy tomorrow, it will continue to monitor EUR-CHF and hope that EUR-CHF will continue to rise, and will only actively intervene on the FX market if we see an appreciation shock in CHF”, added Commerzbank.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Swiss Franc was neutral at -29.9694, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -29.4065. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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