Has liquidity preference in the CHF peaked?
The SNB is expected to continue anchoring its policy firmly beyond today’s meeting, especially with perceptions of a worsening external event and price environment for Switzerland. With the Fed seemingly moving in the opposite direction, it also makes sense to reinforce pricing of policy differentials to exert more downside pressure on the Swiss NEER. However, if the SNB really wishes to see a sustainable rise in EURCHF and USDCHF, a sharp reduction in franc liquidity preference is needed – and by all agents.
Read the full report: UBS