Chart of the Week: SNB Forex Intervention
Head of Macroeconomic Research
Summary: On Thursday morning at 11:30 AM (GMT), the SNB will communicate its monetary policy decision. We expect that interest rates will remain unchanged.
In this edition, we focus on upcoming central bank meetings once again. On Thursday morning at 11:30 AM (GMT), the SNB will communicate its monetary policy decision. Like most analysts, we expect that interest rates will remain unchanged. The fact that the ECB has only lowered its deposit rate by 10 basis points last week substantially reduces the pressure on the SNB to lower its rates.
On the top of that, the SNB now seems to be comfortable with the current CHF exchange rate. According to the latest data, the evolution of sight deposits at the SNB is stable at CHF 591 billion, which tends to suggest that the central bank has reduced its FX interventions or even temporarily stopped them since the last week of August.
Given number of risks that may emerge in coming weeks and could potentially push the CHF higher (Brexit, growth slowdown and US tariffs against Europe following the US victory in Airbus case), the SNB has every interest in keeping ammunition. Lowering interest rates as early as this week would considerably reduce the central bank’s room for maneuver later.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.