FxWirePro: Prefer bidding over SNB than on already priced in Fed - Swiss franc to appreciate further against dollar and euro

The G10 FX markets have been wary as the Fed, BoJ, BoE, and SNB are lined up to hold their monetary policy meetings this week. Even though none expects the US rate hike at tomorrow’s FOMC meeting but the focus will be on the post-FOMC press conference.

The most speculators would be keen on to see how much Brexit risks have dampened Fed Chair Janet Yellen’s optimism.

So, we currently attach meritoriously a zero probability to this month’s rate hike as FOMC is most likely to stand pat in its fund rates.

For the US, markets are currently pricing only an even probability of one interest rate hike this year by December.

As a result, the benchmark US 10yr treasury yields trading at the lowest level this year and fell below 1.57%, down 4-1/2 basis points in Asian time.

Elsewhere, when all eyes on Fed, the Swiss National Bank’s (SNB) FX market interventions have long since been an issue.

The Swiss National Bank left its deposit interest rate unchanged at a record low of -0.75% on March 17th 2016 as expected, saying the franc remains significantly overvalued. Policymakers also lowered GDP growth and inflation forecasts for this year due to weak global economic outlook.

The SNB has long since been concerned about the Swiss franc being in demand in connection with the Brexit referendum.

However, the sight deposits published yesterday do not suggest that the SNB intervened against CHF strength last week. That fits in well with the notable downtrend in USDCHF as well as EURCHF.

EURCHF lost more than 2% last week and has reached the lowest levels since early April. Whether intended or not, the SNB is sending out a clear message to the market: it does not want to assume the full risk and will not tolerate (at least partially) downtrends in EURCHF.