Headlines:
- SNB cuts key policy rate by 50 bps to 0.50% from 1.00% previously
- Swiss franc falls after SNB goes with 50 bps rate cut today
- SNB chairman Schlegel: We do not like negative interest rates
- SNB chairman Schlegel: Inflationary pressure has decreased markedly over the medium term
- SNB chairman Schlegel: Our main instrument is the policy rate
- SNB's Schlegel: SNB doesn't like negative rates but they do work
- China announces that it is about to hit 2024 economic growth target
- Weekly update on interest rate expectations
- BOJ reportedly erring towards keeping interest rates unchanged next week
- Ifo institute warns that German economy could only grow by 0.4% next year
- IEA raises world oil demand growth forecast for next year
Markets:
- AUD leads, CHF lags on the day
- European equities mixed; S&P 500 futures down 0.2%
- US 10-year yields up 3.3 bps to 4.304%
- Gold down 0.2% to $2,711.93
- WTI crude up 0.1% to $70.34
- Bitcoin down 1.0% to $100,635
The main event in the European morning was the SNB policy decision. And the Swiss central bank "surprised" with a 50 bps rate cut.
Analyst estimates were for a 25 bps move but market pricing had been leaning more towards a 50 bps move instead. The latter saw a ~58% probability of a 50 bps rate cut and the SNB duly delivered on that. There was still a decent chunk of traders anticipating a 25 bps rate cut, so the Swiss franc did fall in the aftermath of the decision.
USD/CHF moved up from 0.8825 to 0.8890 and is keeping around 0.8870 levels currently. Meanwhile, EUR/CHF caught a modest bounce to 0.9340 but has seen gains ease back down to 0.9315 at the moment.
The SNB did change up their forward guidance a little in removing the passage that "further rate cuts may be necessary" to just mentioning that they will monitor economic developments and adjust monetary policy accordingly.
Besides that, there wasn't too much for broader markets to work and that includes the dollar in general as well. The greenback is keeping lightly changed against most other major currencies, with only the aussie sitting higher otherwise. And that owed to a stronger Australian jobs report from earlier in the day. Still, AUD/USD saw its gains managed and is only up 0.4% to 0.6395 now - down from around 0.6420 earlier.
We also got some China headlines after the central economic work conference, in which it is confirmed that they will hit their 2024 GDP growth target of around 5%. So, expect the final numbers to reflect that once we get through the year. Other than that, there was just the usual high-level commentary from China in talking up their motives and goals for next year.
In the equities space, things were more tentative despite the gains from yesterday. Meanwhile, bond yields are holding higher with 10-year yields in the US touching 4.30% again. It is definitely a spot to watch as bonds have been offered on every day of this week so far.
The ECB is up next but the decision should be a more straightforward one. So, don't expect much of any fireworks as the central bank will deliver a 25 bps rate cut and likely reaffirm its meeting by meeting approach.
