Weekly Report

The Swiss National Bank kept its 3-month libor target unchanged at 0.00-0.25% and pledged to protect the EUR/CHF floor set to 1.2000 in September 2011. The direct intervention on EUR/CHF helped the Swiss economy from massive appreciation and stronger deflation through the euro crisis, the solid SNB credibility kept EUR/CHF above the floor without need for further intervention to protect the 1.20 levels. However, the franc weakness remained capped at 1.2650 on May 2013. Since then a steady bearish bias and sustained CHF demand brought the cross down to 1.2104 on March 2014, the lowest since January 2013. Although the persistent downside pressures raised fears on June 5th ECB intervention, the negative correlation between EUR/USD and EUR/CHF over the past year partly offset the EUR weakness after Mr. Draghi introduced the additional stimulus package in the Euro-zone.