Ahead of the SNB rate setting verdict (13:00 GMT) and the Franc has been sold against the Dollar as the mild corrective action, on the back of the perceived stock rebound, forced USD/CHF higher. Stops were triggered on the break into the 1.22's, above 1.2205/10, before a US investment house sold into the highs at 1.2216 to cap further strength.
The SNB is widely expected to ratchet their target 3-month LIBOR band by a further 25bps. Many in the market have already priced in such a move, taking rates from 1.50/2.50% (with a mid-point of 2.00%) to 1.75/2.75% (with a mid-point of 2.25%). As a result, the hike itself may not satisfy many CHF bears as even the higher Swiss rates are still attractive enough to encourage carry interest.
Thus the attention will turn to the accompanying data and official rhetoric from Roth and Co to see if the CHF will still be used as a funding vehicle for carry trade activities in the medium-term. Into North American trading and US data will also play a part with option traders also noting expiries down at 1.2150.
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