CHF: SNB on hold but sound rather dovish

The Swiss National Bank (SNB) is expected to keep its policy rate unchanged at -0.75% and to preserve the target range for three-month Libor at -1.25/-0.25% at its 18 June meeting, but to highlight downside risks to growth and inflation from an overvalued exchanged rate. 

Moreover, the SNB will reiterate its ability and readiness to ease policy further should a sustained CHF rally materialize. Downside risks to growth and inflation were recently reiterated by the KOF Institute economic forecasts, which noted that "due to the strong Swiss franc, GDP growth will remain low at 0.4%, unemployment which traditionally lags behind the economic trend, is likely to increase for the foreseeable future and the decline in prices will continue". 

Barclays notes:

• We think geopolitical developments in Greece remain a key risk for the SNB and will be closely watched. An escalation there would likely trigger safe haven demand for the CHF, which will be met by further SNB cuts, in our view. 
  
  
• We continue to expect significant downward pressure on the CHF on the basis of deteriorating economic data and negative returns to capital. We see value in being long USDCHF to express this view.