SNB FX intervention continues

The SNB has been acting to protect the Swiss Franc. The currency can currently be traded above CHF 1.08 against the single currency.

Downside pressures on the EUR/CHF remain. It is clear that the Swiss National Bank tries to maintain the pair above 1.07 / 1.08.

This is why FX intervention should continue. The total and domestic sight deposits morning have been released this morning. Those deposits have increased marginally on the week ending July 22. However it is likely that interventions keep going, even though it is slowing down. Indeed uncertainties on the future of the EU has now paused for a while. Markets are back on focusing (again) towards this Wednesday’s FOMC meeting and the likelihood of a September Fed rate hike is increasing towards 25%.

Next SNB meeting will be held on September 15, we do not expect any change as we still believe that the central bank, if needed, will act by surprise as it did several times. The central bank is clearly focused on defending the Swiss franc and it is more and more difficult as the liabilities side of the SNB balance sheet is expanding very largely. We also consider that a EURCHF at 1.08 is only sustainable only in the short-run for the economy. By the way Swiss exports suffered last week, declining by -3.3% for June. The trade balance is still positive as manufacturing imports also declined. Overall, the economy is slowing down. The SNB should continue to be under pressure.

Yann Quelenn – Market Analyst – Swissquote