The Swiss central bank is continuing its monetary easing, while Chinese authorities have announced another surge of “liquidity” in local markets. The EUR/USD is drifting around 1.1150, with a return above 1.12 still the basic scenario.
Farewell to the President
The Swiss National Bank (SNB) has cut interest rates for the third time, bringing the current level in Switzerland to 1%. The Swiss central bank was the first among developed economies to begin a cycle of easing as early as March, and importantly, it had the room to do so as it managed to control inflation the quickest; in August, the CPI index was only 1.1%. Also, projections for 2025 suggest a level not exceeding 1%, which still argues for further adjustments in monetary policy (in the form of rate cuts). Today, some analysts were expecting the SNB to decide on a deeper cut of 50 basis points. Therefore, it is not surprising that the CHF slightly strengthened on the FX market today, as the decision was 25 basis points lower than the forecasts. The Swiss bank sets rates on a quarterly basis, so we can expect another move of 25 basis points in December. More attention should now be paid to the CHF, as Swiss exporters are demanding its weakening. For them, trading is becoming less profitable in the current situation in Europe. The SNB may finally decide to fight and want to influence the CHF rates. However, remember that the franc is a safe haven and investors put their money into it in case of turmoil.
Moving on
This week we already wrote about the announcement of a stimulus package from China. Some measures have already been implemented, others are about to appear. Nevertheless, today we received more information about new solutions. There is talk of a cash injection from the central bank to the six largest banks, effectively forcing them to intensify their lending activity to stimulate the economy. Moreover, such a solution was last used over 15 years ago, illustrating the determination of the Chinese authorities to stimulate the economy.
Difficulty in breaking 1.12
This wave of optimism on the markets is not visible in EUR/USD rates, which are drifting around 1.1150 and no significant move can be seen at the moment. The attack on 1.12 was unsuccessful and resulted in a slight pullback. On one hand, investors are still contemplating the scenario of a 50 basis point cut in US rates while on the other, geopolitical risk is subsiding. Nevertheless, the USD is not weakening, and some analysts believe this is a matter of monetary policy.
The author of the report is Krzysztof Pawlak, a currency analyst at Walutomat.pl.
Source: https://managerplus.pl/chinskie-wladze-zwiekszaja-plynnosc-na-rynkach-szwajcarski-bank-centralny-kontynuuje-luzowanie-monetarne-12842
