CHF: SNB selling FX reserves?
Fundamental bias: Mildly bullish
EUR/CHF is turning a little higher. It is hard to blame this on the Swiss National Bank meeting, which highlighted that rates would stay at -0.75% and FX intervention would continue if required. Interestingly, one of the Swiss banks suggested that the SNB may have been selling FX reserves earlier this year. If true, that would be a dangerous game for the SNB. Who would want to sell CHF if they knew the SNB wanted to off-load its large FX reserves (shrink its balance sheet) at slightly lower CHF levels?
The week ahead will see the KOF update its economic forecasts. There are probably upside risks here given that Swiss business sentiment has been surging recently. As an aside, the SNB did recently revise up its inflation profile – but with forecast inflation still below 2.0% YoY in late 2022/23, the SNB, like the BoJ, will be one of the last to tighten – and the CHF should be at the forefront of losses in the face of any further dollar strength.
EUR/CHF is turning a little higher. It is hard to blame this on the Swiss National Bank meeting, which highlighted that rates would stay at -0.75% and FX intervention would continue if required. Interestingly, one of the Swiss banks suggested that the SNB may have been selling FX reserves earlier this year. If true, that would be a dangerous game for the SNB. Who would want to sell CHF if they knew the SNB wanted to off-load its large FX reserves (shrink its balance sheet) at slightly lower CHF levels?
The week ahead will see the KOF update its economic forecasts. There are probably upside risks here given that Swiss business sentiment has been surging recently. As an aside, the SNB did recently revise up its inflation profile – but with forecast inflation still below 2.0% YoY in late 2022/23, the SNB, like the BoJ, will be one of the last to tighten – and the CHF should be at the forefront of losses in the face of any further dollar strength.
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