CHF: Intervention, pharma and the franc – ING

It's been quite a busy week for Swiss news. On Monday, the Swiss National Bank effectively increased the amount of CHF banking deposits exposed to a 0.25bp charge. The press release pitched that as a technical clean-up to last year's adjustment in minimum reserves. It doesn't look like a 'stealth' easing of monetary policy, but it's interesting to see what happens to Swiss money market rates when the measure goes into effect on 1 November. It is a downside risk to the franc, however, ING's FX analyst Chris Turner notes.

EUR/CHF to continue to trade near 0.92/93 into year-end

"Late Monday also brought a very rare joint statement from Swiss and US authorities on the use of FX intervention. The SNB statement marketed this as a kind of blessing to use FX intervention as part of its regular monetary policy activities. Whereas the US version of the statement merely focused on the use of intervention to address disorderly or volatile markets. That may be the reason why EUR/CHF has not traded much higher on the news. And these releases preceded data which showed SNB FX buying intervention had picked up a little to CHF5bn in the second quarter."

"We speculate whether the FX intervention statement has something to do with the pharma deals President Trump is announcing this week. Presumably, Washington wants to get the Swiss drugmakers onside as he launches his new 'TrumpRx' website to deliver drugs at discounted rates to US consumers. Pfizer was the first of the big companies to sign up to this yesterday. If this read is right, then, yes, maybe Switzerland does have Washington's blessing for continued FX intervention and can avoid being labelled a currency manipulator."

"SNB FX intervention will be passive, however, and we forecast EUR/CHF to continue to trade near 0.92/93 into year-end."