The Euro to Swiss Franc (EUR/CHF) exchange rate strengthened to its highest level in a week on Wednesday as the Swiss National Bank (SNB) announced that it was reducing the number of institutions exempt from negative interests on cash deposits held at the bank.
The Euro to Swiss Franc (EUR/CHF) Exchange Rate Touched A Session High Of 1.0368
‘The Swiss National Bank has completed its review of exemptions, and has considerably reduced the group of sight deposit account holders that are exempt from negative interest. Specifically, negative interest will now also apply to the sight deposit accounts held at the SNB by enterprises associated with the Confederation,’ the SNB said in a statement.
The announcement by the SNB caused the Franc to tumble against its most traded peers as it caused economists to raise their bets that the bank could cut interest rates further and take them deeper into negative territory.
The banks move is also being seen as a pre-emptive measure to limit the flows into the safe haven Swiss Franc likely to be caused by a Greek default and possible exit from the Eurozone.
‘The SNB move to tighten its rule on sight deposits increases the odds that it will go for more negative interest rates, especially faced with the risk of a Greek event,’ said Sebastien Gely, currency strategist at Societe Generale.
Euro to Swiss Franc Exchange Rate Stronger Despite Eurozone Confidence Data
The Euro was able to advance by more than 1% against the Franc despite the release of data, which showed that consumer confidence across the Eurozone fell in April. The fall was down to mounting concerns about a possible Greek exit from the single currency bloc and the possibility that the wider region will be negatively hit by the fallout.
According to the European Commission’s preliminary data, consumer confidence fell from -3.7 in March to -4.6 in April. It was the first fall recorded in five months.
‘This fall could be linked to increased concern over the Greek situation, or it may just be a correction following recent sharp increases,’ said Howard Archer, an economist from IHS Economics.
The Euro could make further gains against the Franc on Thursday as the markets are likely to continue to digest the SNB announcement. Also of interest will be Eurozone PMI data releases.