The SNB looks set to cut rates to 0.25%. Comments on quantitative easing and the franc’s level will be critical for the near-term currency trend. Overall, the bank is likely to take a dovish stance and again warn on action against currency strength. The Swiss franc is, therefore, likely to lose ground against the Euro and Sterling following the policy meeting.

The franc was also unable to make headway against the Euro on Wednesday and weakened to lows beyond 1.48 before a correction as there were rumours that the interest rate decision had been leaked.

The National Bank quarterly policy meeting will still be an important focus on Thursday, especially with strong pressure for further action to support the economy and speculation over non-conventional measures such as quantitative easing. The most likely outcome is that there will be a further 0.25% cut in rates to a target rate of 0.25% and such an outcome should be in the price which will limit the impact.

Any move towards quantitative easing would also be negative for franc sentiment while the franc will gain initial support if there is a move to resist an immediate move to buy bonds directly.

The bank comments on franc strength will be closely watched as they have been vocal in warning over potential intervention over the past few weeks. There are liable to be further warnings against currency strength from the bank officials in the press conference which will severely contain the potential for Swiss currency gains. Any actual intervention in the market would weaken it very sharply. The franc pushed back to 1.15 against the dollar on Thursday, before consolidation around 1.1560.