With the Swiss National Bank meeting only once a quarter there seems to always be some chatter and rumors about the possibility that the SNB will raise its EUR/CHF floor from the current level of 1.20. However such scenario in the upcoming release seems unlikely. While some politicians and those in the exports and tourism industries would love to see a weaker CHF, the SNB likely considers its current path a successful one and will resist being pressured into further moves to depreciate the currency.

Even as the euro has strengthened against the dollar over the last week and a half is unable to carry that advanced to its fight against the Swiss franc. This week we test key support near 1.2060 that if breached would set up a big battle between the market and the SNB. The fact that the Greek debt negotiations have not found resolution continue to not see a resolution in the Greek debt negotiations, the CHF continues to be bid as a safe haven thereby reinforcing a fundamental bias for the Swiss franc against the euro in these conditions.

With an economy that is slowing and annual consumer inflation falling into negative territory the speculation around Thursday’s SNB interest rate decision is quite high. The options available to the SNB are to raise the EUR/CHF floor from 1.20, impose negative interest rates or other capital controls on foreign deposits, or to take a “wait and see” approach. We highlight these options as well as take a look at the USD/CHF and EUR/CHF as we have seen these 2 pairs diverge recently.