The Swiss franc rallied today on the back of risk aversion on the Forex market. The currency largely ignored the monetary policy meeting of the Swiss National Bank and somewhat disappointing domestic macroeconomic data.
As was widely expected, the SNB left its monetary policy unchanged, keeping interest rates in the negative territory. The central bank announced a new benchmark rate to replace the target range for the three-month Libor:
The Swiss National Bank is today introducing the SNB policy rate. From now on, it will use this rate in taking and communicating its monetary policy decisions. The SNB policy rate replaces the target range for the three-month Libor used previously, and currently stands at â0.75%.
The SNB provided following explanation for such decision:
The reason for introducing the SNB policy rate is that the future of the Libor is not guaranteed. The UKâs Financial Conduct Authority will only ensure that the Libor is maintained through to the end of 2021.
The Swiss central bank signaled that its monetary policy will remain expansionary, especially in face of the franc’s strength triggered by trade wars:
The SNB’s expansionary monetary policy remains necessary against the backdrop of the current price and economic developments. On a trade-weighted basis, the Swiss franc is somewhat stronger than in March and is still highly valued. The situation on the foreign exchange market continues to be fragile. The negative interest rate and the SNB’s willingness to intervene in the foreign exchange market as necessary remain essential in order to keep the attractiveness of Swiss franc investments low and thus ease pressure on the currency.
Released separately by Switzerland’s Federal Statistical Office, the Producer Price Index showed no change in May from the previous month, the same as in April. Ahead of the report, analysts had promised a small increase by 0.1%.
USD/CHF dropped from 0.9955 to 0.9931 as of 13:23 GMT today. EUR/CHF sank from 1.1235 to 1.1202. CHF/JPY rallied from 108.97 to 109.20, bouncing from the daily low of 108.73.
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