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Flash: SNB unlikely to tinker with EUR/CHF floor target – UBS

FXstreet.com (Barcelona) - The IMF's annual report for Switzerland is always of importance for the franc.

Indeed, the IMF makes two key points – first, the Swiss National Bank should continue with its floor target for the EUR/CHF at 1.20 given Switzerland is experiencing deflation and renewed safe-haven inflows could strengthen the franc again. However, 'if confidence in global financial markets takes hold, the SNB should cautiously unwind past interventions, and it should exit the floor if a monetary tightening becomes necessary'.

According to the UBS Research Team, “We think the SNB will not be willing to start selling its foreign exchange reserves anytime soon even if the EUR/CHF and USDCHF continue to rise. In particular the SNB will not want to be seen 'fine-tuning' exchange rates or cause the franc to start rebounding again. That keeps us bearish on the currency.” The EUR/CHF broke 1.25 overnight. “We expect the cross to reach 1.27 and the USD/CHF 0.99 over the next three months as sentiment in financial markets keeps improving.” they add.

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