Today it is the turn of the Swiss National Bank (SNB) to let the market know whether or not it will be changing its policy rate from -0.75%. The Swiss interest rate hasn’t changed since 2015 as it tries to curb inflation or deflation whilst keeping prices stable.
The SNB target range for the 3-month LIBOR rate in Swiss francs is also called the reference interest rate. The SNB sets a target for the 3-month LIBOR rate, the ‘SNB target range’ with the lower and upper limit around 1 percentage point apart, with the reference rate in the middle of the range. Any deviation from previous policy around this target range could see some movement in the forex markets today. From the coronavirus pandemic market lows last year, Swiss CPI has been rising from -1.325% to -0.504% last month. Though the inflation data is far from inflationary I am sure the SNB will make a comment that they are watching the progression as the last time they recorded a positive CPI was February 2019 at 0.579%.
The USDCHF forex pair has been highly correlated to the US 10-year yields though in this last month as the yields have made an about-turn after the FOMC meeting, this relationship between the USDCHF and US10Y yields has disconnected. The US dollar is gaining ground and should it get through these 200 daily exponentials moving average and market structural resistance the Swiss franc could depreciate rapidly.
The bullish US dollar theme has meant that in the overnight session the Japanese Yen dropped to 108.980 bringing it down to 9-month lows. Emerging markets are becoming more vo
cal that higher US yields will lead to a financial crash in their markets, and one would expect a flight to safety in the yen would be the first course of action if the fed have to intervene and crush this rising Greenback. Traders are bearish the US dollar and bullish the yen by 64% according to the ActivTrader sentiment indicator, so that reading alone could indicate higher prices to come.
The New Zealand Dollar moved higher towards 0.7000 pairing back some of the losses following the NZ government's moves on their housing market. There is little market structure on the daily time frame to act as support, so the downside targets are still in play. However, the daily time frame shows that the 200 EMA may have been the market's target having not been tested since the summer of 2020.
Later today we have the PCE data readings and US GDP which will give the Fed some more reason hopefully to not change their monetary policy. However, the initial jobless claims are expected to be at the depressing 700k+ levels which will be the worst 52 week stretch of elevated jobless claims since the great financial crash and so much worse than even then.