The Swiss franc dipped against the dollar and the euro after Switzerland’s retail sales data showed a decline of 0.2% in October following a 1.4% fall in September. Analysts expected the indicator to register a 1.2% increase.
Sterling also pushed higher against the franc after the data. GBPCHF rose to 1.4385 from 1.4364. USDCHF climbed to 0.9164 from 0.9151 and EURCHF rose to 0.2348 from 1.2335.
The Swiss franc began to weaken before the data after a report that stoked expectations that the Swiss government may introduce negative interest rates in order to weaken the franc. Basically such a negative rate would act as a “tax” on offshore deposits.
The multi-party seven-member Swiss cabinet said it was ready to consider two parliamentary motions requesting that it create the legal framework for such a tax.
UBS economist Reto Huenerwadel dismissed the prospect of negative interest rates, noting that the SNB has already been largely successful in keeping the franc off its highs, adding that negative interest rates have not deterred traders in the past.
“The last time negative interest rates have been introduced in Switzerland they did not prevent the CHF from strengthening,” Huenerwadel said in a research note.
Traders remain on alert for any indication the SNB could shift the current 1.20 franc cap against the euro, and the SNB’s next quarterly policy assessment in mid-December will be closely watched.