Yann Quelenn
Swissquote Bank Ltd
The Swiss deposits data release continues to outpace expectations. They are now reaching almost 580 billion CHF (578.2b vs 577.4b expected). The main reason for this is that the SNB is not ready to stop its ultra-loose monetary policy as President Thomas Jordan said and this drives strong upside pressures on the CHF. The EURCHF is standing around 1.0850 and we do not see how, at least in the medium-term, the pair could hold consistently above 1.10.
The SNB's monetary policy depends widely on its giant neighbour, the Eurozone, and while financial markets were expecting Mario Draghi to hint a few weeks ago at the ECB meeting about a further normalisation, this has not happened yet. As a result, intervention to defend the CHF on the FX market will continue for the SNB as long as there is no normalisation from the ECB.
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We also note that there are economic uncertainties in Europe and we believe that it should prevent the ECB to normalise its interest rates. Santander acquired Banco Popular in Spain and in Italy, Intesa San Paolo has been forced to acquire Banco Popolare di Vicenza and Veneto Banca. The Italian state will likely engage up to 17 billion in this operation. It is then not the exact moment for the ECB to raise rates (charge of the debt would become too massive at this point). Therefore CHF overvaluation will continue and we continue to be bullish on the Helvetic currency.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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