Looking for signs from the Swiss National Bank

More policy accommodation by the ECB in the coming months will likely add pressure to the SNB and increase market speculation regarding further policy measures. Indeed the SNB is expected to step up FX purchases should the recent EURCHF sell-off persist. More broadly, a wait-and-see policy stance by the SNB is expected in the coming months. If the ECB extends the time horizon of QE the decline in medium-term EONIA rates are expected to put further pressure on the EUR to depreciate. That pressure is not expected to be too great on the EURCHF bilateral rate.

A relatively stable EURCHF or in fact a resumption of the EURCHF uptrend will likely keep the SNB on the sidelines. In contrast, a cut in the ECB's deposit rate likely would have a significant effect on the EURCHF exchange rate and provoke a more immediate response from the SNB - extending negative deposit rates to all sight deposits rather than the roughly one-third to which it now applies. 

"Although we continue to forecast modest EURCHF appreciation, we also see value in owning out-of-the-money upside in EURCHF under a scenario where the ECB further cuts its deposit rate. On that note, this week's SNB Q3 currency allocations and earnings reports (Friday) will likely attract market interest", added Barclays.