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The ECB and SNB monetary policy statements were the highlights of the session, but the ECB’s decision to announce an end to its QE program while keeping rates unchanged was widely expected. And the same can be said for the SNB’s decision to maintain its current monetary policy.

The euro therefore closed out the session mixed, while the Swissy happily sailed higher despite the SNB’s dovish tone and pledge (or threat) to “remain active” in the forex market. And the Swissy was likely bid higher because of the risk-off vibes in Europe.

The Swissy wasn’t the top-performing currency of the session, however, since that honor goes to the the pound.

All the comdolls, meanwhile, had a rather rough time during the risk-off session, with the Aussie getting the worst of it.

  • German final HICP y/y: unchanged at 2.2% as expected
  • French final HICP y/y: 2.2% as expected vs. 2.5% originally
  • SNB’s monetary policy unchanged
  • The Swissy is still “highly valued” according to SNB
  • SNB downgraded its 2019 and 2020 inflation projections (again)
  • SNB also downgraded its growth forecasts for 2018 and 2019
  • ECB kept key policy rates steady
  • ECB repeated forward guidance that rates won’t budge “through the summer of 2019
  • ECB affirmed that QE program will end after December  2018
  • ECB presser coming up; watch it live here

Major Events/Reports:

ECB’s monetary policy decision

The ECB announced its latest monetary policy decision late into the session. And in its official press statement, the ECB announced that all key policy rates were unchanged.

The refinancing rate is therefore maintained at 0.00%, the marginal lending rate is unchanged at 0.25%, and the deposit rate is steady at -0.40%.

The ECB also repeated its forward guidance that:

“The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary.”

As for the QE program, the ECB affirmed that the QE program will finally end this month, which is within expectations.

However, the ECB said that it “is enhancing its forward guidance on reinvestment,” adding that the ECB “intends to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it starts raising the key ECB interest rates, and in any case for as long as necessary.”

Overall, nothing really out unexpected. Market players are now sitting tight for what ECB Overlord Draghi has to say in the ECB presser.

And if you didn’t know, you can watch a live stream of the ECB presser by clicking here.

SNB monetary policy decision

As widely expected (and as usual), the Swiss National Bank (SNB) announced that its monetary policy is unchanged.

The target range for the Libor rate is therefore still between -1.25% and -0.25%, with the median target rate at -0.75%. The interest rate on sight deposits, meanwhile, was also unchanged at -0.75%.

And while the SNB acknowledged that “the Swiss franc has depreciated slightly on a trade-weighted basis,” the SNB attributed that to “the strengthening of the US dollar,” while pointing out that the “franc is virtually unchanged against the euro.”

SNB Overlord Thomas Jordan elaborated on that a bit more during the presser that followed by saying that:

“Overall in 2018, however, it has appreciated by 3.5% against the currencies of our trading partners, largely driven by a weaker euro.”

And as such, the SNB concluded by repeating its mantra that “the Swiss franc is still highly valued.”

And as a natural consequence, the SNB renewed its promise (or threat) to “remain active in the foreign exchange market as necessary” (*cough* currency manipulator *cough*) since a weaker Swissy and the SNB’s negative rates “remain essential” in order to ” keep the attractiveness of Swiss franc investments low and reduce upward pressure on the currency.”

Other than that, the SNB also said that it “now anticipates slightly lower GDP growth of around 2.5% for 2018 as a whole,” adding that “economic momentum in Switzerland is likely to weaken somewhat in 2019,” with an expected “rise of around 1.5% in GDP.”

As for inflation, the SNB warned that “new conditional inflation forecast for the coming quarters is lower than it was in September … mainly due to the drop in oil prices.”

The SNB still expects inflation to hit 0.9% this year, though. However, the 2019 forecast “has been revised down from 0.8% to 0.5%.” The 2020 forecast, meanwhile, was downgraded from 1.2% to 1.0%.

Risk aversion returns to Europe

Risk aversion finally staged a comeback during the morning London session, forcing the major European equity indices broadly lower.

And according to market analysts, risk aversion returned because of disappointing earnings and lingering Brexit-related uncertainty.

However, it’s also likely that we’re just seeing some profit-taking after two consecutive days of broad-based gains and ahead of the ECB presser.

  • The pan-European FTSEurofirst 300 was down by 0.32% to 1,377.24
  • Germany’s DAX was down by 0.12% to 10,915.93
  • The blue-chip Euro Stoxx 50 was down by 0.03% to 3,107.05

Major Market Mover(s):


The pound had been encountering buyers since before the session even began. And during the morning London session itself, the pound found even more buyers and was the top-performing currency of the session.

There weren’t any direct catalysts for the pound’s strength, but some market analysts were pointing to relief buying after British PM Theresa May survived the leadership challenge and before she meets with E.U. leaders to try and ask for assurances with regard to the backstop solution for the Irish border issue.

GBP/USD was up by 8 pips (+0.06%) to 1.2660, GBP/AUD was up by 42 pips (+0.24%) to 1.7516, GBP/CAD was up by 25 pips (+0.15%) to 1.6921


After a good run during the earlier session, all the comdolls (AUD, NZD, CAD) were broadly in retreat during the morning London, with the Aussie getting the worst of it, likely because of retreating commodity prices and the risk-off vibes in Europe.

AUD/USD was down by 16 pips (-0.23%) to 0.7226, AUD/JPY was down by 13 pips (-0.16%) to 81.99, AUD/CHF was down by 15 pips (-0.20%) to 0.7170

Watch Out For:

  • 1:30 pm GMT: ECB presser; watch it live here
  • 1:30 pm GMT: U.S. initial jobless claims (226K expected vs. 231K previous)
  • 1:30 pm GMT: U.S. import prices (-1.0% expected vs. 0.5% previous)
  • 1:30 pm GMT: Canada’s NHPI (0.0% expected, same as previous)
  • 7:00 pm GMT: U.S. Federal budget balance (-$193.5B expected vs. -$100.5B previous)