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Investing.com -- Citi reaffirmed its position Tuesday that the Swiss National Bank is unlikely to cut interest rates into negative territory or intervene in foreign exchange markets in the coming months.
The financial services firm cited potential pharmaceutical tariffs as a factor in its analysis. Citi maintains its long position on the Swiss franc against the Japanese yen through the upcoming SNB meeting.
Markets currently price in a small probability of a deeper rate cut into negative territory by the Swiss central bank. Citi expects that if the SNB refrains from such action, rate differentials will shift marginally in favor of the Swiss franc, potentially giving the currency a slight upward movement.
While Citi anticipates the SNB will continue to mention currency intervention and negative rates as available tools in its policy arsenal, the firm believes the threshold for implementing either policy remains very high in the current economic environment.
The financial institution recommends investors place little emphasis on any SNB comments regarding potential interventions, given the bank’s assessment that such measures are unlikely to materialize in the near term.
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