SNB has its policy meeting this week and no change in the policy is expected, after last week's ECB disappointment. Originally it was proposed that SNB would remove the exemption from negative depo rates for the domestic banks' sight deposits, its "nuclear" option was conditional on ECB taking aggressive action that would weigh on EUR/CHF.
ECB disappointed the market, pushing EUR/CHF higher. SNB, as a result of this, is likely to wait and see , which indicates no changes to SNB policy this week. There is a low probability of rate cut priced in by market currently(15%).
"We have closed our long USD/CHF spot position and look for better levels to re-engage but remain bearish CHF due to the currency's overvaluation and downside risks to growth and inflation", says Barclays in a research note.
Furthermore, a significant increase is likely in the SNB's FX reserve data, but most of the move should be driven by valuation effects owing to the CHF's NEER depreciation in November.
