Tomorrow the Swiss National Bank deliver their latest policy decision 15 March
Some conjecture on whether the recent surge in EURCHF to 3-month highs of 1.0825 has pointed to something being brought out of the hat by Jordan & Co tomorrow (Thurs) .
I'm not so convinced though and whilst I always expect the unexpected (as per my FOMC preview) I don't think tomorrow is the day for policy change. unless they really feel they need to pre-empt some risk-off sentiment of real size either after any FOMC disappointment, Brexit concerns or more importantly today's Dutch and other forthcoming elections in France and Germany. Jordan has said again recently it's not time to end negative rates.
The SNB are only too aware that CHF safe-haven demand has been a real pain in their backside over recent months and they have been forced into weakening the franc as per their previous policy statements.
The moves higher in EURCHF lately though have been greater than usual with SNB supporting USDCHF at 1.0060 and lower into 1.0000 while giving EURCHF a nudge in the right direction.
That latest move higher though can also be attributed to the euro demand prevailing at the time as I highlighted in my post reporting a less than aggressive rise in SNB sight deposits on Monday:
"Total sight depos inc other depos on sight in CHF.Sight depos are the accounts of commercial banks with the SNB and make up a large part of the banking system's liquidity. The SNB increase sight deposits by FX swaps and repos of its own debt.
This can indicate SNB intervention to weaken the franc but these figures don't support the large rise in EURCHF in the past week so we can also point the finger at general euro demand."
So if the SNB had been the real driving force over that week then it wasn't fully reflected in those depo figures and CHF pairs duly retreated whereas the end-Feb SNB reserves I reported on 7 March showed a huge increase thus confirming their presence and on-going smoothing operations hitherto.
I warned frequently about the risks of being long of EURCHF ahead of the 1.2000 SNB CHF cap set for the pair but since they pulled the plug (and slaughtered many trading accounts) I've also been happy to recommend longs from the lows, albeit as a jobber, being happy to t/p into rallies and we've seen great two-way business along the way.
I stand by that view and the SNB themselves admit they have been active. Further euro wobbles and/or general CHF demand though may well mean they have to resort to other tools in their box inc cutting rates further but I don't see a case for that tomorrow.
Decision and statement at 08.30 GMT with full details published on their site here
Current rates:
- 3-month lower LIBOR target -1.25%
- 3-month upper target -0.25%
- sight depo rate -0.75%
USDCHF 1.0087 EURCHF 1.0708 doing little today but let's see where we are after FOMC and Dutch election exit polls.
I'm away tomorrow and Friday but if the SNB do spring a surprise then I'll try and stop by and post some thoughts. Otherwise I wish you all good trading and I hope our input has/will make/save you a few pips along the way. SNB
Will SNB's Jordan deliver another surprise?
