FX update: EUR/CHF remains range bound ahead of Thursday's SNB meeting

Since the last SNB intervention EUR/CHF has not been able to sustain a hold above the 200-day moving average which comes in at 1.5164 today.

Swiss retail sales rose 1.2% y/y in April when adjusted for inflation. When adjusted for inflation and shopping days, sales were 9.6% higher, but may have been exacerbated because of the Easter holiday.

Overall, the local market is sidelined as flows remain reduced ahead of the SNB policy meeting on Thursday. EUR/CHF is hemmed in by 1.5050 bids and offers from the 1.5100 area, while stops have built up below 1.5040 and larger interest is noted below 1.5000 and 1.4980.

Some players suspect that interest from central banks or a supranational name could come in ahead of 1.5000, which was the case in mid-May and led to a decent short covering rally. Speculative names via the options market have gambled on more range bound activity and sold EUR/CHF puts and ATM volalility in anticipation of more EUR/CHF supportive action.

The SNB is not expected to change its key Libor rate, but should maintain its commitment to FX intervention when necessary and will likely continue with its non-standard policy measures, which included outright bond purchases.