Early Thursday morning, the Swiss National Bank (SNB) is expected to keep interest on sight deposits at –0.75% and the target range for the three-month Libor between –1.25% and –0.25%. The SNB is also expected to reiterate they will remain active in the foreign exchange market as necessary. The recent data has disappointed for Switzerland, with the monthly readings coming in negative for both GDP and inflation. The SNB will also update their forecasts, where they could lower their inflation outlook again for 2019. At the September meeting, the central bank lowered the inflation forecasts for 2019 and 2020.
The SNB rate decision is likely going to be a non-event for quite some time, as many economists are not pricing a rate rise until the end of 2019. The SNB missed an opportunity earlier in the year to raise rates once the EUR/CHF cross was able to return to the old ceiling at 1.2000. Slower growth in Europe is likely to delay the ECB from raising rates. The ECB has been consistent in aiming to keep record low rates through the 2019 summer, but if we see their tightening scheduled pushed further back, we could see the SNB follow by staying accommodative a little bit longer and possibly till the end of next year.
Price action on the EUR/CHF daily chart shows that yesterday’s low formed a bullish butterfly pattern. Point D is confirmed with the 200% Fibonacci expansion level of the X to A leg and the 127.2% Fibonacci expansion level of the B to C move. Today’s stronger euro move is finding resistance from the downward sloping trend line that began on November 8th. If price is unable to close above the 1.1320 level, we could see downward pressure return. Key support could come from 1.1155, which is the 61.8% Fibonacci retracement of the 2017 low to 2018 high move. To the upside, 1.1371 remains key resistance.