- Swiss policy makers have said franc remains overvalued
- Franc falls as much as 1.2% vs euro, biggest move since June
Swiss National Bank President Thomas Jordan may be breathing a sigh of relief after the European Central Bank’s new round of stimulus fell short of expectations.
The franc weakened as much as 1.2 percent against the euro, the most in six months, after the ECB cut its deposit rate in line with forecasts, but didn’t expand its monthly asset purchases. There was a risk that a large stimulus could have pushed up the franc, which SNB officials have already said is overvalued.
“Although the SNB is still at the mercy of the ECB, there’s no immediate pressure to act,” Markus Schmieder, an economist at Wellershoff & Partners Ltd in Zurich, said by phone.
The ECB lowered its deposit rate by 10 basis points to minus 0.3 percent, narrowing the gap with the Swiss equivalent, a spread that SNB officials are keen to maintain. They’ve already cut their rate to a record-low minus 0.75 percent.
While the reduction was in line with the median estimate in a Bloomberg survey, one third of responds predicted a larger cut, while there were also expectations for an increase in the level of monthly purchases in the quantitative easing program.
The franc weakened as much as 1.2 percent to 1.09395 per euro, the biggest intraday decline since June 3. It was at 1.09137 as of 5:31 p.m. Zurich time, down 0.8 percent. It’s still 10 percent higher than at the start of the year, before the SNB scrapped it’s 1.20 currency cap.
The SNB’s next scheduled policy decision is on Dec. 10, when it will update its growth and inflation forecasts. Economists in a Bloomberg survey last month said that if the central bank needs to cut again, it can probably go as low as 1.25 percent. SNB spokesman Walter Meier declined to comment.
“We continue to see risks of easier policy from the SNB if its current trend of depreciation stalls or reverses,” Marvin Barth, head of European foreign-exchange strategy at Barclays Plc in London, wrote in a research note. Still, the ECB having fallen short of expectations “implies no change in SNB policy at its meeting next week.”