SNB to keep policy on hold but risks are still heavily skewed towards additional easing

Attention will once again turn to the SNB, which will be setting policy on Thursday. Markets expect no additional measures, at this juncture, albeit highlighting that the risks remain heavily skewed towards further easing in subsequent meetings or even intra-meeting. 

Despite having brought the CHF off its extremely overvalued highs of mid-January, following the surprise SNB move to abandon to the EURCHF floor, significantly negative Swiss rates have not managed to push EURCHF close to estimate of 1.10. In fact, EURCHF has been depreciating in the past few sessions, owing to general EUR weakness. 

At the same time, economic data from Switzerland has continued surprising to the downside. February CPI figures configured significant deflationary pressures building up, whereas the effect of the significantly overvalued CHF has yet to reflect on GDP data. 

Barclays notes as follows:

We continue to think that the CHF plays a crucial role in SNB monetary policy and assign a relatively high probability of FX interventions and/or further cuts in interest rates if it continues appreciating.