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If you think the FOMC statement might be the only main event this week, think again! SNB head Thomas Jordan and his men might steal the show with their policy statement tomorrow if they decide to announce another forex intervention. How likely is this scenario? Here are some signs that the SNB is up to something:

1. EUR/CHF is trading dangerously close to the SNB floor.

Perhaps every forex trader out there is keeping a close eye on EUR/CHF’s trading levels, as the pair edged closer to the SNB’s 1.2000 floor after the ECB decided to cut interest rates twice this year. Recall that the SNB imposed a franc peg back in 2011 then intervened in the currency market again the following year to defend the EUR/CHF floor.

EUR/CHF Daily Forex Chart
EUR/CHF Daily Forex Chart

With the ECB likely to ease further, there’s a good chance that the euro could undergo stronger selling pressure against its forex counterparts, including the franc. And with central bank intervention proving to be a somewhat effective way of curbing franc strength, SNB officials might decide to take this route again if EUR/CHF heads any lower.

2. Jordan himself said so!

Jawboning is nothing new to SNB head Thomas Jordan, as he has been repeatedly quoted saying that the Swiss central bank will do whatever it takes to keep the franc’s gains in check. “The franc is still highly valued,” he said in an interview this week. “Enforcing the minimum exchange rate of 1.20 per euro is absolutely central to ensure adequate monetary conditions in Switzerland.”

In addition, Jordan pointed out that keeping the franc capped is crucial in maintaining price stability in Switzerland, especially as economic conditions are worsening. As always, he emphasized that the SNB stands ready to defend the peg by buying unlimited foreign currency.

3. Deflation is still a threat in Switzerland.

As SNB head Jordan mentioned, weak price growth is still a problem in Switzerland, as the possibility of deflation could further undermine economic performance. Bear in mind that the central bank’s mandate is to maintain price stability, which involves setting an annual inflation target of 2%. Right now, Swiss consumer prices are projected to post a mere 0.1% uptick for the year and a bleak 0.3% gain for next year.

Some market analysts have noted that the raising the EUR/CHF floor from 1.2000 to 1.2500 might be a more aggressive way of warding off deflationary woes. Another option is to implement negative deposit rates, which SNB spokesman Walter Meier and Governing Board member Thomas Moser hinted at earlier this month.

4. Happy intervention-sary!

Call me sentimental but the SNB might want to celebrate its intervention anniversary this September by actually interfering in the forex market! As you can see from the EUR/CHF chart I posted above, SNB officials seem to have a knack for making big announcements during this particular month.

It has been a couple of years since the SNB last intervened and has been mostly sticking to jawboning ever since. Whichever policy option they choose, there’s no denying that the pressure for the SNB to take action has been getting stronger and that they might be forced to make their move this week. What’s your game plan for this event? Don’t be shy to share your thoughts and trade ideas in our comment box!