EUR/CHF Lower After SNB, ECB Monetary Policy meetings

The EUR/CHF pair has reversed sharply back from earlier session highs in the 1.0460s territory and now trades in the 1.0410s.

The pair is expe to move lower as a reaction to the Swiss/Eurozone inflation figures in the wake of ECB and SNB policy announcements.

With the bears eyeing an imminent test of the psychologically important 1.0400 level, it has been an unusually choppy session for the pair given that both the Swiss National Bank and European Central Bank both announced monetary policy decision on the session.

Initially, the Swiss Cera Bank meeting appeared influenced the Swiss franc, though in wake of the ECB meeting, this weakness reversed and CHF is now the best performing G10 currency on the day.

Interest rates were held as expected at -0.75% and Governor Thomas Jordan pledged that rates will remain unchanged given comparatively modest inflationary pressures in Switzerland versus most other developed nations.

The characterisation of CHF was maintained at highly valued and the SNB pledged to continue FX interventions where necessary. As for the ECB meeting; the bank confirmed as expected the end of the PEPP by the end of Q1 2022 and announced that, in order to avoid a cliff-edge drop off in bond purchases, the APP would be upped to EUR 40B in Q2 and EUR 30B in Q3 and then at a pace of EUR 20B indefinitely afterward.

The ECB’s inflation forecast for 2022 was substantially upgraded (to 3.2% from 1.7%) but ECB President Christine Lagarde was keen to emphasise that a hike in 2022 is unlikely. Why this weighed on EUR/CHF at the time was not quite clear, with some suggesting the upgrade to Eurozone inflation highlighted Eurozone/Swiss inflation differentials.