SNB's Maechler: Reaffirms pledges on FX intervention, negative rates


  • SNB jawboning CHF lower as concerns mount over global growth fears and a flight to safety.
  • EUR/CHF is already trading close to the lows of the year.

The Swiss National Bank's Andréa M Maechler, Member of the Governing Board, has crossed the wires saying that ‘any intervention’ requires an analysis of cost/benefits - plenty of jawboning going on here.

Key comments:

  • Negative rates are working, still, have plenty of room for fx intervention.
  • The attractiveness of CHF has ‘enormously increased’.
  • Expansive monetary policy remains necessary.
  • Reaffirms pledges on FX intervention, negative rates.
  • Swiss inflation pressures remain weak.
  • Negative rate is important because it helps reduce the attractiveness of the Franc.

FX implications 

This will likely become a major theme in the FX space in the near future while risk-off flows will flood into the Yen and perhaps ti a lesser a degree, the CHF, as markets fear the SNB's rugged manhandling in controlling the strength of their currency, holding no bars when it comes to timing nor care for the wider industry (casting minds back to when the SNB removed the floor of the EUR/CHF even after saying that it was not something that they would do just out of the blue).

Currently, there is no acute pressure on EUR/CHF. Analysts at ING Bank explained that CHF sight deposits have only risen CHF1bn since early June, "suggesting little or no FX intervention from the SNB to limit CHF strength. Yet as 2H19 progresses and more clarity emerges on ECB rate cuts and its plans for quantitative easing, expect SNB policy to come under greater scrutiny."

This begs the question, that to prevent the CHF becoming even more ‘highly valued’, can the SNB take negative rates (now -0.75%) even deeper into negative territory and could it undertake a fresh round of large-scale FX intervention?  Maechler seems to suggest that it can - So it is something to keep in mind with the European Central Bank coming up next month and heightened trade risks along with subsequent concern over global growth, not to mention recessionary data coming out of what are supposed to be the leading economic powers of the world - EUR/CHF is already trading close to the lows of the year.

"Expect the market to now question the Swiss national bank’s ability to match ECB rate cuts and undertake large scale FX intervention. We can see the inflation-adjusted CHF trade-weighted index moving back to 2015 highs, which should mean EUR/CHF at 1.05,"

analysts at ING Bank argued. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!


Latest Forex News

Editors’ Picks

EUR/USD pressured as EZ ministers fail to reach a deal

EUR/USD is trading around 1.0850, down on the day. Eurozone finance ministers failed to reach a deal on a joint response to the coronavirus crisis. Disease-related headlines are eyed.

EUR/USD News

GBP/USD is hovering around 1.23 as updates on the PM are awaited

GBP/USD is trading around 1.23, stable. Updates on PM Johnson's condition are eyed amid fears of a partial power vacuum. Updates related to the disease are eyed.

GBP/USD News

Forex Today: Dollar bounces as coronavirus keeps spreading, Johnson still in ICU, Fed minutes eyed

The market mood is mixed after US stock gains vanished late on Tuesday. The slide allowed the dollar to recover, and it is rising across the board early on Wednesday. Coronavirus has already infected more than 1.4 million and taken the lives of over 82,000 people. 

Read more

WTI pierces $25 amid mixed clues, EIA data eyed

WTI holds onto recovery gains. The US catalysts seem to drive energy prices more than from the Middle East. API data escalated the inventory build, EIA might follow the footprints. Coronavirus crisis weighs on the market sentiment. 

Oil News

Gold regains $1,650 amid cautious trade sentiment

Gold defies the pullback from the monthly top. While Monday’s coronavirus (COVID-19) data suggested receding fears of the deadly disease, the latest figures keep the risk-off alive. The US FOMC minutes will decorate the economic calendar.

Gold News

Forex MAJORS

Cryptocurrencies

Signatures