The Swiss franc ended on a mixed note, losing against the British pound, US dollar, and Japanese yen while gaining against the commodity dollars and euro, as the Swiss producer and import price index fell 0.3 percent in May, dragging the annual rate down to -5.0 percent, the lowest since December 1986. Indeed, lower commodity prices and a stronger Swiss franc, which dampens import prices from the Euro-zone, have both been contributors to the drop in Swiss inflation. This turns our attention to Thursday, when we’ll see a policy announcement from the Swiss National Bank (SNB). The SNB is likely to leave their 3-month LIBOR target range unchanged at 0.0 percent – 0.75 percent, but the thing to watch for in the SNB’s subsequent policy statement is talk of FX intervention. Indeed, the SNB’s last statement on March 12 indicated that the central bank wanted to “prevent any further appreciation of the Swiss franc against the euro” in an effort to “counter the risk of deflation and of a dramatic deterioration in the economy.” Similar comments have the potential to drive the Swiss franc lower upon this 3:30 ET release, while a neutral policy stance and no mention of currencies will likely lead the Swissie higher.
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