After a few months of being in the minor headlines of the Wall Street Journal, the EURCHF and the Swiss National Bank were back in the main pages over the weekend Swiss Prepare Plans in Case of Euro's Demise (haven’t ripped open physical newspaper in a few years so my only guage is from the online edition). Last week’s talk of renewed SNB policies to weaken the franc were substantiated by statements from Chairman Thomas Jordan over the weekend where he stated "We must be prepared for the worst case, under which the currency union falls apart, even though I don't expect this to happen.”
Overall, the SNB isn’t stating anything new other than falling along with pretty much what every other central bank is saying (somewhere along these lines) “If the EU breaks up, there will be a short term run on our currency, global financial markets will be affected negatively, and we aren’t waiting around for the EU to fix themselves, so yes, we are acting unilaterally in adding stimulus to guard our own country’s economy.” (on a side note, this rationales leads SwiftTick to believe that other than a gangbuster NFP number, there is no way the Fed won’t starting easing again; but more on that on Friday).
As such, we don’t see how the SNB won’t become more aggressive in its actions to weaken the Swiss franc. Whether this means raising the EURCHF price floor is anyone’s guess. However, with the SNB holding its interest rate policy meeting in two weeks we continue to believe that the SNB will hold the 1.2000 price floor. Also, we expect to see another move in the pair towards 1.2100 or above as we near the meeting.
On the other hand, the reality of the situation is that the SNB knows that they can only keep this up for a limited amount of time. As such, unless the Swiss economy takes a sudden nose dive and the SNB goes ultra-dovish we expect the EURCHF price floor to gradually begin to be lowered later in the year.