In terms of market pricing, it is literally a 50-50 call at the moment. The OIS market is pricing in an exact split between a 25 bps and 50 bps rate cut currently. So, that’s important to take note of even if the “expectation” is for a 25 bps rate cut.
The SNB would prefer a weaker franc at this stage and they’ve been quite vocal about it. But if they are to move by 50 bps just for that, they’re also eating away at any more buffer room to cushion against further blows to the economy moving forward. It’s a fine balance.
I mean, they could just go with 25 bps and then start labelling the franc as being “overvalued” again too. That will be a clear message to markets as well that they are willing to intervene to limit appreciation in the currency. But in doing so, they risk seeing a reactionary jump in the franc given market pricing. So, they will have to deal with that if this is their choice.
Anyway, all of this conjecture makes this policy decision one of the more interesting ones this month. So, we’ll see how that plays out later in the session.
For now, the dollar is lightly changed mostly but the aussie is being boosted slightly as China continues to hammer home the message that they are taking big action in trying to revive the economy this week. The Politburo announcement here is stirring up further gains in domestic markets and that is seeing AUD/USD up 0.5% to 0.6858 currently.
0600 GMT – Germany October GfK consumer sentiment
0730 GMT – SNB announces September monetary policy decision
0800 GMT – Eurozone August M3 money supply
That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.