SNB

Hot on the heels of the Fed meeting, the SNB (Swiss National Bank) and BOE (Bank of England) are up next in today’s European session.

The CPI reading for Switzerland in April was 2.9% YoY, its highest level since September 2008!

Comments from SNB’s president suggest the central bank might be closer to hiking rates sooner than some expect.

A possible 175 pip move down to 1.0334 is definitely something to be on the lookout for

Next week is unquestionably one of the most exciting times you will see in the markets particularly for the GBP/USD and pound crosses as we will have the all-important UK parliamentary vote on the Brexit deal coming up.

It’s been another rough day for global stock investors (see my colleague Fawad Razaqzada’s note “Global stocks extend decline as Chinese markets resume slide” for more), so it’s not surprising that the safe haven Japanese yen is once again at the top of the FX relative performance charts. What is interesting is the price action in the US dollar, which is the worst-performing major currency on the day.

Last week saw the Swiss National Bank offer absolutely no hints about the prospects of tightening in the foreseeable future. In contrast, Mario Draghi, the European Central Bank President, was quite bullish on Eurozone inflation outlook.

The SNB was surprisingly relaxed about the currency’s recent strength, once again describing the franc as merely being "highly valued."

Political headlines and trade fears are dominating the headlines in today’s North American session, leading to a slight risk-off tone despite a positive open for risk assets. As a result, we’ve seen the US dollar, Japanese yen, and Swiss franc ascend to become the strongest major currencies on the day after bringing up the rear through the first four days of the trading week.

Both the US dollar and US equity markets attempted to bounce on Wednesday after consecutive down days, but were unable to fully buck the pressures imposed largely by fears of an impending global trade war.

The US jobs report for November was released on Friday. Although the headline non-farm payrolls number came in significantly better than expected at 228,000 jobs added in November against a prior consensus forecast of around 200,000 jobs, wage growth turned out lower than expected.

It might not be on every trader’s radar, but the EUR/CHF has reached its highest level since the Swiss National Bank’s decision to scrap its 1.20 floor in January 2015.

After the UK’s Consumer Price Index inflation data for August came out higher than expected on Tuesday, speculation that the Bank of England would be taking on a more hawkish stance during Thursday’s monetary policy decision boosted the British pound dramatically against other currencies. On Wednesday, however, the UK’s average earnings index (3-month average ending in July, compared to the same period a year earlier) fell short of expectations at 2.1% against a prior consensus forecast of 2.3%. This put somewhat of a damper on the hawkish BoE thesis, prompting the pound to pare some of Tuesday’s gains. Despite the lower-than-expected wage growth, however, other aspects of the jobs data beat expectations, including another multi-decade low in the UK unemployment rate and a surprise decrease in unemployment claims for August.

The tide is turning: central banks are finally in the process of ending their extraordinary loose monetary policy stances that had been originally established in response to the global financial crisis and the economic slump that ensued. The US Federal Reserve started the process of normalising its policy, raising interest raised rates three times now.

While most central banks are or close to dropping their dovish policy stances, the Swiss National Bank is likely to buck that trend for a while yet as it seeks to devalue its currency. The SNB is almost certain to leave its main Libor Rate unchanged at -0.75% tomorrow morning and deliver the usual warning about it being ready to intervene in the FX markets if necessary.